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What Is a Condominium Reserve Fund?

Posted by Sherry Rioux on February 9, 2012

Part Three in the Condo Series

In Part One of this series, we talked about the fact that condominiums are made up of exclusive use units as well as common elements; the parts of the development that are owned in common by all of the unit owners.  These would usually include things such as roadways, parking lots, on-site amenities, roofs, etc.  The costs to maintain, repair and replace these common elements are shared amongst all of the owners in the condominium corporation.

A reserve fund is essentially a savings account.  A portion of the condo fee you pay each month is transferred to a separate trust account for the reserve fund.  The amount that is contributed is established based on reserve fund studies which the Board of Directors must use to ensure it is properly funded.  The reserve fund study looks at the lifespan and condition of all the major elements and forecasts anticipated costs for the common elements.

Usually, a healthy reserve fund with a decent balance is a good sign of a well managed corporation.  Sometimes, the fund is low however, the corporation may have just completed major work and is beginning to rebuild the fund.  If that is not the case, further investigation is often needed to determine why the balance is low.  When you obtain a status certificate of the corporation, it will provide the most recent reserve fund study as well as information on any inadequacies in the fund, planned top-ups (special assessments to owners) or anticipated projects.

Related Posts:

Part 1:  What Is a Condominium 
Part 2:  What is a Status Certificate?

One thought on “What Is a Condominium Reserve Fund?

  • on September 3, 2013

    Contingency reserve funds are used to pay for costs outside of the operating fund. These costs include non-yearly costs such as replacing the roof and major non-annual maintenance. There are also minimum levels for these to be funded each year. Although the BC legislation for obtaining a depreciation report begins on December 14th, 2013, there is a bit of a rush for current stratas to obtain one.
    Depreciation reports are key to understanding the financial requirements of your strata. Not many people realize the hidden costs in owning a condo or a house. Although these major purchases should come with some kind of warning for how you can maintain them, there is not usually much documentation besides strata minutes to sift through to estimate what costs there could be. Hiring only experienced professionals helps with adequately planning for your family’s finances and that of your strata.

    When possible, it is also important to have the company conducting the report to use depreciation report software that does not lock you down to only one company’s proprietary system. Although there are few choices available for software, the web based tool available by Structured Reports is the most advanced one available today. It is user friendly for inspectors, strata owners, strata council, and property managers.

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