What is a Reserve Fund?
The reserver fund is an integral part of your monthly condo fees and it creates the ability to pay for scheduled repairs needing to be made to the complex. The reserve fund can be as low as a few thousand dollars, upwards into the hundreds of thousands or more. How much is in the reserve fund largely depends on what the reserve fund study dictates.
Don't be side tracked by large numbers. Just because the reserve fund balance is super high, does not mean it's healthy. You must review all documentation pertaining to the association and complex in order to determine the health of the condo corporation.
You have the ability - and it is recommended - you hire an independent condo documentation reviewer to give you their opinion, not unlike a home inspector.
Reserve Fund Study
The reserve fund study or Engineering Report is one of the key factors in determining your monthly fee. The engineering report will look at, assess the life and cost of every aspect of the complex.
- Roof, Siding and General Building Envelope
- Driveway, Sidewalks & Retaining Walls
- Doors and Windows (if the association covers)
- Decks, Patios
- Flooring in Common Areas
- Get the point? Everything.
Oh, you do not want this.
Special assessments can be the result of a variety of things. Even a well run condo association can find themselves needing to assess against units for a cash call.
As a condo buyer, you need to be aware that special assessments happen and if they are called - you must pay. Sometimes they are just a few hundred dollars, I have seen them over $100,000 (per unit - seriously).
Why a special assessment? It is possible the cost to replace the roof came in significantly higher than anticipated, or an unexpected expense for repairs or even a builder deficiency. This is where reviewing all the condo documents comes in. Most often you will find your answers within the monthly or annual meeting minutes.