Key Takeaways
- The long-used rule of contributing 5% of the annual operating budget to the reserve fund no longer reflects current conditions.
- It doesn’t consider inflation, unexpected repairs, or the real state of building components.
- The result often includes special assessments, delayed work, and added financial strain for co-owners.
- Under Quebec’s Bill 16, a professional reserve fund study is now required and must be based on the building’s actual condition.
- Genispec conducts detailed assessments with on-site inspections and tailored financial scenarios.
- A well-structured reserve fund protects the building and supports unit value during resale.
A Simple Rule That No Longer Works
Many condo corporations still rely on a familiar guideline: contributing the equivalent of 5% of the annual operating budget to the reserve fund. Developers often set this amount when the syndicate is created.
But in practice, 5% rarely covers a building’s medium or long-term needs.
“They assume 5% is enough. It might seem acceptable early on, but issues increase with time, costs rise, and inflation affects everything. It doesn’t hold up anymore.”
What the 5% Rule Leaves Out
1. Inflation and Rising Construction Costs
Material prices, labour, and technical interventions have increased sharply in recent years. A budget set in 2015 doesn’t carry the same weight in 2025.
2. Uneven Wear of Building Systems
Buildings don’t age the same way. A roof might last 15 years or fail after 8 if installation or maintenance was inadequate. A flat percentage (like 5%) doesn’t reflect real conditions.
“Some firms base their calculations only on theoretical lifespans. We start with a full on-site inspection. That changes everything!”
3. Technical Surprises
Water infiltration, a blocked drain, cracks in underground parking areas, these repairs can cost tens of thousands of dollars. A fixed percentage cannot anticipate these situations accurately.
The Maintenance Logbook: The Essential Foundation for Reliable Planning
Before even discussing the reserve fund study, it’s important to understand the central role of the maintenance logbook. This document compiles the complete history of the building and provides an accurate picture of its actual condition. It typically includes:
- past maintenance and repairs
- emergency interventions
- warranties and key deadlines
- technical recommendations over the years
With this solid foundation, the syndicate maintains continuity of information, even when management changes.
The maintenance logbook is also what allows professionals to build realistic projections. A well-structured and up-to-date logbook reduces unexpected issues, supports better decision-making, and greatly improves the accuracy of the reserve fund study that relies on it. The more complete it is, the more the financial planning reflects the building’s true condition.
A More Realistic Approach: A Tailored Reserve Fund Study
Bill 16 in Quebec requires a professional reserve fund study within three years of a condo corporation’s creation. This includes:
- A component by component review of the building
- An on-site inspection
- A 25-year financial projection
Genispec’s reserve fund studies also include multiple scenarios (more cautious, moderate, and more flexible options), giving co-owners clear paths based on their collective budget.
“It’s not an exact formula or a document that stays unchanged. It’s a practical tool to help plan ahead.”
When the Reserve Fund Falls Short
When the reserve fund is too low, condo corporations often face difficult choices:
- Emergency special assessments
- Co-owners refinancing their units to cover their share
- Postponed work, which can lead to worsening damage
Younger buyers often feel the impact most, since many have already stretched their finances just to purchase their unit.
A Strong Reserve Fund Supports Resale Value
A solid reserve fund reassures potential buyers. It signals responsible management and consistent building maintenance. A clear, up-to-date reserve fund study can influence a buyer’s decision.
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“People pay close attention to this now. It matters when comparing buildings.”
Don’t Rely on a One-Size-Fits-All Formula
The 5% rule served as a baseline for many years. But in 2025, with rising costs and new legal requirements, it no longer reflects a building’s true needs. A reliable evaluation requires on-site expertise, realistic projections, and recommendations based on the actual state of the property.
If you want to know whether your reserve fund is adequate, request a study grounded in a real-world assessment of your building. Genispec can guide you through the process.
Genispec
Consulting engineering firm based in Québec
Genispec est une firme de génie-conseil composée d’ingénieurs en bâtiment membres de l’OIQ. Nous offrons des services spécialisés en inspection des façades et stationnements souterrains selon la Loi 122, en étude de fonds de prévoyance et carnet d’entretien selon la Loi 16, ainsi qu’en inspection de bâtiments commerciaux, multi-logements, industriels et copropriétés. Nous réalisons aussi des certificats d’état d’immeuble et des inspections de pré-réception.
Tous nos rapports sont validés par un ingénieur qualifié. Tous les articles publiés sur notre site sont révisés et approuvés par un membre qualifié de notre équipe, afin de garantir l’exactitude technique de l’information.