If you’re a condo owner you are probably well acquainted with condo fees. Condo fees can get a bad rap sometimes, but there’s a lot more to them than general maintenance and seasonal grounds care. One of the most significant recipients of your condo fees is the condo reserve fund. If you haven’t yet, it’s important to take a detailed look at your reserve fund, how it works and what information you are entitled to as the condo owner.
What Is A Condo Reserve Fund?
The Government of Alberta’s Condominium Property Act requires that condominium boards establish and maintain a capital reserve fund for major repairs and replacement of property owned by the corporation.
So what does this actually mean?
Most homeowners have had to face a major repair or two over the life of their home. It’s not always the most pleasant of experiences, nor is it always expected. Remember setting money aside for that looming roof job? Or perhaps it was the summer driveway re-seal that had been deferred for a couple winters too long. It might have been an unexpected furnace replacement. What does the condo reserve fund do? It ensures that your condominium corporation is prepared for these sorts of repairs so you don’t have to worry about them.
How Does It Work?
To establish the condo reserve fund condominium corporations must first conduct a reserve fund study and adopt a reserve fund plan with the condo’s board. The purpose of the reserve fund study is to determine funding needs based upon anticipated property repairs and potential contingencies over a 25-year period.
Typically, condominium corporations must conduct a new reserve fund study every five years that must then be reviewed by the condo board in order to create a new reserve fund plan. These updates are important opportunities to make adjustments to the fund as the property ages and as needs change.
With the reserve fund plan in place, the condo board has the authority to designate funds for repair and replacement as needed.
Why Is It Important?
The reserve fund is funded through condo fees collected from owners, borrowed money as approved by the condo corporation or, under exceptional circumstances, special assessments. Why is this important? Well, if you’re a condo owner, it directly affects you.
Every condo owner contributes a portion of their finances to the reserve fund through condo fees. Those contributions keep your home and community in tip-top shape, or at least they should. And that brings us to our final point: there are some things you should know!
What You Should Know
While your condo board takes care of most of the decision-making with respect to the reserve fund there is some information that you, as a condo owner, should keep track of. Legally, condo boards do not need to consult owners before making decisions around the reserve fund, but that doesn’t mean it’s not good practice. As a condo owner, you should be able to review an annual report on the reserve fund at every annual general meeting. This report should include an opening balance, money in and out, the repairs and replacements the money was allocated to, and the source of the funds.
Now, it has happened that under certain circumstances, the condo corporation does not have enough money in the reserve fund to cover significant repairs or unexpected expenses. In this case, the board may require each condominium owner to pay a special assessment, or special fee, separate from the monthly condo fee. It’s important to keep track of and be aware of potential assessment fees.
Condo owners should also be able to review the updated reserve fund study and plan every 5 years. Revised plans typically lead to adjustments in condo fees. As is the case with annual reports, these should be made available to you for your review; after all, they directly affect your bank account.
Reserve Funds: The Benefits Outweigh The Costs
Prospective condo owners often view condo fees in poor light but beyond the general maintenance and list of services and amenities, one of their most important destinations is the reserve fund. The reserve fund enables condo owners to collectively fund the necessary repairs and replacements that most homeowners must take care of on their own. As a condo owner, it’s still important to keep track of where your money is going and voice your questions and concerns as they arise. But you can trust that the fund will be there for you when the unexpected arises and something needs replacing.
While it’s a practical blessing, perhaps the greatest benefit of the reserve fund is what goes unseen: the time and freedom that comes with someone else worrying about home repair, big or small. It’s just one of the many benefits that come with purchasing a Calgary condo.