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.
Manitoba Condominium Act
Manitoba's Condominium Act was passed 1968. Since then, several amendments have been added, but over time condominium owners have found that the law no longer meets their needs. As condos have become an increasingly prevalent portion of the local real estate market, a provincial review of the Condominium Act was recently conducted. Input was collected from both industry leaders and the public, with the goal of creating an updated version of the law that more accurately reflects the current real estate market and provides better protection for condominium owners.
The reserve fund section of the Condominium Act is receiving a considerable amount of attention as a part of this review. The 1968 version does not require reserve fund studies, leaving condo owners vulnerable to the costs of unanticipated repairs for which adequate funds do not exist. Often, corporations have to impose special levies on condo owners to make up for these funding shortfalls.
Under the new version of the act, however, reserve fund studies will be mandatory. All condominium corporations will be required to complete a study within a specified period of time, and then update them at regular intervals. This will align Manitoba's legislation with many other Canadian provinces, including British Columbia, Ontario, Saskatchewan and Alberta.
The updated regulations will soon go into effect, so it's wise for property managers and condominium boards of directors to be sure they have conducted a reserve fund study as soon as possible. In addition, although not required, it would be beneficial to have these studies conducted by accredited real estate appraisers or professional engineers to provide extra protection through professional liability insurance.