Is the Reserve Fund Properly Funded?

A reserve fund is a special “savings account” with a mandated function that’s separate from a condominium’s operating budget. It’s funded by your major repairs and replacement costs in common elements. A properly funded reserve fund ensures that the Corporation has enough money to pay for future renovations.

When there is a shortfall, the Condominium Corporation would have to raise a large amount of money from unit owners in a short period. Spiky spending may trigger unexpected — and sometimes large — increases. Even so, without planning, a reserve fund study may suggest future increases, as inflation raises costs and interest on savings varies.

In an underfunded reserve fund, however, sometimes gaps in the planning process mean serving a lot more owners than necessary to keep spending prohibitive. Some jurisdictions’ roads are now creating infrastructure guidelines on these schedules, as more cities explore window option now provides some certainty and a cheaper window solution.

It is recommended that every three years a new audit supplement surprises. And condo owners should follow these few recommendations to plan their budget as well.