Reserve funds require condominium corporations to create and maintain a fund to provide for major repairs and renovations of property the corporation owns. This applies to the buildings themselves, as well as common property such as the parking lot or underground utilities. A designated portion of the Owner-paid monthly common element fees fund this reserve.
A reserve fund study is a long-range financial document designed specifically for condominium communities. It includes a list of the major physical components of a property and an analysis of the components' condition and projected life cycles. A reserve fund also identifies the projected costs to repair or replace these building components and assesses whether or not adequate funds exist to take care of these repairs. Finally, the study includes a financial plan that projects future costs, as well as the estimated reserve fund contributions that will be needed to cover these expenses over time.
Reserve fund studies are beneficial for a number of reasons. They ensure all condominium unit owners pay their share of replacement and repair costs based on their period of ownership. Potential condominium buyers are becoming more aware of the significance of reserve fund studies and rely on them when deciding whether or not to buy. And ultimately, these studies help create proactive maintenance plans, reduce repair costs and save owners money in the long term.
For more information about Reserve Fund Studies, please contact us.