The topic of reserves is a big one for small condo buildings. HausFS clients often want to know how much they should have in their reserves. The answer to this question, unfortunately, is not simple.

Reserve funds are monies set aside over time to provide for the eventual repair or replacement of major building components. These are projects that don't happen frequently (such as roof replacement, tuck pointing, hot water heater replacement, etc.) but will have to be addressed during the life of the building. The best way for any condominium association to determine how much they should have saved for these projects is to have a Reserve Study completed by a qualified engineer. A Reserve Study will inventory all of the common elements that must be maintained by the association, predict their useful life, project the date of required replacement or repairs, and estimate the cost of that work. The Reserve Study then uses this data to calculate the annual Reserves Contribution required to properly fund the reserves. A study often covers a 20-30 year span and should be updated every five years or so.

The problem is, most small associations do not go to the trouble of having a Reserve Study completed. In fact, none of our clients do. Cost is a factor, and many condo owners simply aren't planning 20-30 years into the future. But failing to adequately fund reserves can lead to large special assessments that owners may not be prepared to pay.

In lieu of a Reserve Study, small associations may want to opt for an annual inspection. This allows the board to discover what maintenance items should be handled now, what may need to be done in the next few years and what can wait. Having a year or two (or more) to plan for a major expense is always preferable to trying to collect a large amount in one fell swoop. It can also prevent smaller projects from becoming larger (and more expensive) projects. This approach may save you a lot of money and stress in the long run.

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