What is a reserve fund?

A reserve fund is a separate trust account which all condominium corporations are required to establish. A portion of the common expenses paid by the owners is transferred monthly to this account. The reserve fund is the unit owners' savings for the major repair and replacement costs of the common elements which occur as a building gets older.

 The contributions made to the reserve fund must be based on a reserve fund study which will establish the amount the Board of Directors must ensure is contributed. Under the Condominium Act, all condominium corporations must carry out a reserve fund study.  If the reserve  fund  is  inadequate,  the Board is required to develop and implement a plan to 'top it up'.

 A healthy reserve fund is a sign of a financially healthy condominium corporation.  Where the reserve fund is low, it may be because the corporation has done a lot of work recently and the corporation is starting to rebuild its fund.  If the low figure in the reserve is not the result of major work having been recently completed, or if the information accompanying the status certificate indicates that there is significant work which must be done and the amount in the Reserve Fund appears inadequate, then you should do further investigation.

 

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