What exactly is a reserve fund?
A reserve fund is a savings account that every condominium is obligated to have. It is there to fund future projects and major renovations in the condominium complex.
A portion of the monthly condominium maintenance fees goes into a reserve fund account. The money put aside in this account are used for replacement of non-routine repairs of the common elements of a condominium. These could include, replacement of roof, windows, boiler, chiller, carpets, parking areas, security systems and any of the building amenities.
It is mandatory for every condominium to have a reserve fund, and every three years there needs to be a reserve fund study documented. The money in the reserve fun need to be in an account where it is easily assessable and cannot be in the stock market or a high risk investment. They are normally placed in a GIC or government bonds.
Before purchasing a condominium, it is important to make sure you or your lawyer review how much money is in the buildings reserve fund and see if there are any upcoming repairs that need to be paid for.
If you have any additional questions regarding reserve funds or a reserve fund study, please do not hesitate to get in touch.
Read more about condominiums:
What are Common Elements?
The Status Certificate
Downsizing 101
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