February’s a funny month. It often finds condo board members torn between two conflicting desires. On the one hand, most folks are desperately looking forward to the end of winter and the return of warmer, sunnier weather. On the other, the imminent arrival of spring means that you’ll finally have to tackle those repairs highlighted in your building’s reserve fund study – the horror!
If the thought of melting snow and blossoming flower beds fills you with a sense of impending dread, it’s probably safe to assume that you fall into that latter camp of individuals. Following your building’s Reserve Fund Study (RFS) and diving into that roofing job doesn’t have to be a scary proposition, though. Sure, maybe you don’t know where to start right now – but guess what? You’ve come to precisely the right place, because that’s exactly what today’s blog will cover.
We’ve discussed reserve funds on this blog before, but that was a while ago now, and with all those spring renovations and repairs just around the corner it seems like as good a time as any to circle back and shine an illuminating light on this complex document once again.
A RFS can be boiled down to a guiding roadmap that a qualified individual (usually an engineer or someone with a similar knowledge and background) compiles following a thorough assessment of the major components of your condo building. This document can then be used to advise your condo board on not only the health of your building, but also in terms of what sorts of preventative maintenance you can undertake to keep any catastrophic failures from happening – as well as when to conduct this sort of maintenance in the first place.
Here in Alberta, the Condominium Property Act requires that condo corporations complete a RFS at least once every five years. In addition to maintaining compliance, following this sort of an inspection schedule will help to keep your condo building from being faced with any unexpected, expensive repairs that might otherwise require the implementation of a special assessment to pay for. Having a reliable study on the books essentially gives your condo board a crystal ball to peer into the future of your building’s maintenance and plan accordingly, avoiding any surprises and keeping your building’s residents happy all at once.
Your building’s RFS is only as reliable as the individual who conducts the inspection in the first place – so, make sure you pick the right person for the job! There are a host of individuals who can legally conduct your study, including Quantity Surveyors, Architectural Technologists, Certified Engineering Technologists, those certified within the meaning of the Architects Act or Professional Engineers Act, holders of a CRP designation, and more.
It can be tempting to try and save a bit of money here, considering the costs associated with having a proper study done can range from anywhere between $1200 to $15,000 (depending on your building and the complexity of the report), but this is never a good idea. Trying to save a few bucks on a study is just about the most perfect example of false economy there is – sure, you might come out ahead in the short term, but you’re setting yourself up for disaster in the coming years if you bring on someone who isn’t as qualified as they should be to conduct an inspection.
Instead, consider investing the time and money into someone who’s going to be thorough and do the job right. After all, you’re basing the next five years of planning, maintenance, and spending on this report, so you’ll want it to be as accurate and detailed as possible.
When it comes to budgeting and setting aside money for reserves, the best way to do so is by not considering dollar amounts, but instead by focusing on percentages. Typically (although things vary from building to building), most condo corporations should be setting aside anywhere between 15-40% of their assessments towards reserves. In buildings where owners mostly maintain their own homes and common areas are few, this number might be a tad bit smaller – while other complexes with pools and numerous other amenities might be higher.
Further, it’s important to take your reserve fund’s starting point into consideration– and here again we look towards percentages and seek to evaluate the “percentage funded.” If your reserves are sitting at 100% funded, you’re in a good spot and have cash on-hand equal to the deteriorated or spent fraction of your reserve’s funding levels. If you’re sitting at closer to 25% funded, and your funds are 75% depleted, you’ve got some work ahead to make that back up in order to avoid running out of money for projects that might be looming on the horizon. The better your condo corporation is at keeping that fund at 100%, the easier time you’re going to have in the long run. Make a commitment to keep your reserves healthy and flush, and you’ll find that even though springtime (AKA “New Roof Season”) is fast approaching, you won’t have a care in the world.
If you’ve got questions about reserve fund studies, including how to implement a living reserve fund study, preventative maintenance, or how all these condo management concepts play together, don’t hesitate to give us a call at Catalyst Condo Manangement today!