What Is a Reserve Fund Study?
A reserve fund study is a legally required assessment that helps condominium corporations plan for major repairs and replacements of depreciating property over a long-term period. It ensures that funds are available when needed to avoid unexpected special levies or financial shortfalls.
The Condominium Property Regulation mandates that a reserve fund study must determine:
An inventory of all depreciating property that may require repair or replacement within the next 30 years.
The present condition of depreciating property and estimates of when each component will need repair or replacement.
Estimated costs of repairs or replacements based on current market rates.
The expected lifespan of each component once repaired or replaced.
Reserve Fund Study Obligations
Who Must Conduct a Reserve Fund Study?
The Condominium Property Regulation requires that the study be completed by a qualified person with expertise in building assessments, such as:
Engineers
Architects
Certified Reserve Planners (CRPs)
Other professionals qualified under the Condominium Property Regulation
How Often Must a Reserve Fund Study Be Conducted?
At least once every five years to ensure that the reserve fund remains adequate.
The board must review the study and prepare a reserve fund plan based on its findings.
Why Is a Reserve Fund Study Required?
A reserve fund study is required to ensure:
The condominium corporation remains financially stable by planning for future expenses.
Unit owners are protected from unexpected special levies.
Compliance with legal obligations under the CPA.
The reserve fund is sufficient to cover projected repairs and replacements.
Under the Condominium Property Regulation, the study must also:
Determine the current balance of the reserve fund.
Recommend how much should be added to the reserve fund to ensure adequate funding for repairs.
Provide a rationale for reserve fund recommendations.
Steps in Conducting a Reserve Fund Study
Physical Assessment:
A professional inspects the building’s common property and managed property (e.g., roofing, elevators, parking structures).
Financial Analysis:
Current reserve fund balance is reviewed.
Future repair and replacement costs are estimated.
Contributions required to maintain an adequate reserve fund are determined.
Final Report & Recommendations:
A written report is prepared with detailed findings.
The board must use this study to create a reserve fund plan.
The Condominium Property Regulation requires that a study must include:
A visual inspection of all visible components of the depreciating property.
Interviews with board members and, if applicable, the condominium manager and employees.
A review of documents, including:
The condominium plan
Building maintenance records
Construction documents
Converted property studies (if applicable)
Analyzing a Reserve Fund Study for Compliance
Key Compliance Questions:
Has the study assessed all required depreciating property?
Are future costs realistically estimated based on current market prices?
Does the reserve fund balance meet projected future needs?
Has the board used the study to prepare a reserve fund plan?
Common Compliance Issues:
❌ The study was conducted more than five years ago.
❌ The reserve fund balance is insufficient to cover projected expenses.
❌ The board has not updated the reserve fund plan in response to the study.
