Why require a reserve fund study for condos?
Other than the fact that it is mandatory as per Bill 16, there are many other reasons that performing a reserve fund study is beneficial for condominium owners. The main purpose is to ensure that appropriate funds are available for building maintenance without any surprise fees for condo owners. At Genispec, our reserve fund study consists of preparing a detailed report of all repairs required or anticipated in order to maintain the physical and functional integrity of the building and its components over the long term to ensure owners have no added financial stress after their purchase.
What are the issues faced by condo owners and boards of directors?
The Canadian Institute of Actuaries developed a research paper entitled Longevity of Infrastructure – Reserving and Risk Management in Condominium Maintenance in Canada which touches on the problems that have led to the creation of the reserve fund study as well as ongoing issues in this sector in relation. According to them the difficulties are as follows:
- bad governance from boards of directors
- directors’ skills and training being inadequate
- insufficient reserve fund leading to a special assessment
- a low reserve fund balance raising concerns among condo owners
- incomprehension from condo owners with regard to the management and operation of a condo building
- costs of repairing or replacing common elements increasing faster than inflation
- lack of transparency in the use of condo fees
- asymmetry of information when buying a condo
- legislation for reserve funds varies greatly between provinces, making it more difficult to bring about large-scale change.
At Genispec, we are aware of these potential pitfalls and perform a thorough reserve fund study that takes them all into consideration.
What are the solutions to these issues?
This same research document proposes solutions for condo owners and boards of directors to reduce uncertainty when it comes to purchasing a condo and reserve fund studies.They are as follows:
- Uniform legislation across Canada for all condominiums.
- A minimum annual contribution and reserve fund balance corresponding to at least 1% of the total value of the building.
- A financial cushion for emergency and adverse deviation as it is not currently a mandatory requirement for reserve funds.
- More data and studies performed to understand the condo industry.
At Genispec, we take all of these solutions and more into account with our reserve fund study proposal. Click on this link to see the full scope of what our reserve fund (or contingency fund) is composed of.
Need a reserve fund study? Call on Genispec!
Based in Montreal, Genispec offers high quality building engineering inspection and consulting services as well as project management. Our engineers, members of the Ordre des ingénieurs du Québec, specialise in the inspection of several types of buildings, including condominiums, commercial buildings and industrial buildings.
Our engineers are equipped to answer your questions and help you inspect your buildings or create your asset management plan. We offer our services in the Montreal metropolitan community, including Hampstead, Saint-Laurent, Mont Royal, Laval, Longueuil, Brossard, West Island, Kirkland, and more. Contact us for any questions you have in mind or if you would like to know more about our wide range of inspection services. To learn more about Bill 16 click here.