Last Updated on April 4, 2024

How Does a Condo Fund a Reserve Fund? | Real Estate Question

By Alan F Macdonald

How Does a Condo Fund a Reserve Fund? | Real Estate Question

A reserve fund for a condominium can be funded in the following ways:

Condo fees

This is one of the original purposes for condo fees – reserve fund contributions. Your condo costs money to maintain and run. Some proportion of condo fees is going to go towards the monthly costs, but there is going to be a certain amount set aside for future maintenance and replacement costs. Reserve funds are for big projects – items like new windows, painting an entire building or replacing a boiler system. But big projects don’t happen that often, so usually a small portion of the condo fees are set aside for the reserve fund. This is the slowest way to accumulate funds for a condominium.

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    Special Assessments

    A special assessment is often the best way to shore up a sad reserve fund. It’s many a condo owner’s worst nightmare, but I think that a special assessment is often a better solution than cranking up condo fees. High condo fees make condos hard to sell, so if you let your maintenance fall behind, suck it up and pay into the fund to make sure you have enough to take care of your future problems. This is not the fastest method in collecting money for a corporation, but it is much quicker than waiting for an increase in condo fees to slowly build up a reserve fund.

    Borrowing Money

    This one is likely not the best solution for a condominium corporation. The thing is, condominium corporations are true non-profit organizations. They don’t make money… ever. So this is just going to come back and bite the owners later on. It’s better to levy a special assessment if money is needed or just raise condo fees. If you needed the cash on a very short term basis – in an emergency – then this might be the only option but it should be a last resort. If anyone mentions this option, it would be best to start asking questions on why that might be necessary. Just like in any part of life, if time is of the essence, borrowing is the quickest way to get money.

    Well that’s it. You can and often will use a combination of these methods to fund a reserve fund for your condominium. There isn’t anywhere else to get money from. You have to collect it per month, in a lump sum, or borrow it.


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