Expenses due to regular and periodic maintenance tasks should not appear in the Reserve Fund. These expenses should be included in the property’s annual operating budget.
For Condominium Corporations, the board of directors fixes once a year, generally after consultation of the annual general meeting of the co-owners, the contribution of the latter to the common expenses, after having determined the sums required to meet the expenses arising co-ownership and operation of the building as well as the sums to be paid into the Reserve Fund.
It is important to understand that a Reserve Fund is an amount of money set aside for the replacement of assets and architectural components. The objective of the fund is to accumulate the necessary liquidity so that when the time comes, the required amounts are available. Contributions to the Reserve Fund must be accumulated, year after year, in order to be used only for major repairs to common areas or for their replacement of assets and components.
There are two (2) elements required to achieve a Study of Reserve Fund.
First, a visual inspection of the building is required. From this inspection, one must know the complete inventory of assets and components (year, make, model, maintenance tasks, frequencies, general condition and useful life of each).
Second, establish a financial projection base calculated from replacement values of assets and components. This projection will be used to determine the required annuities (or cash flows) in order to guarantee the Corporation that the accumulated sums are sufficient to ensure the safety and sustainability of the building (major repair and replacement).
