When we live in a house, we have to maintain the house ourselves, such as repairing the roof when it leaks, or replacing the entire roof when it’s beyond repair or too expensive to repair.
As we live in a condo, there are also things to be repaired or even replaced over time, e.g., elevators, chiller, underground garage, swimming pool. When the time comes to repair or replace these items, it is very expensive to do so.
When we live in a house, if the bathroom leaks, but we don’t have the money to fix it right away, we just tell other members of the family not to use the defective bathroom until we have the money to fix it.
But that’s totally different in a condo. If an elevator is not working, we have to repair it as soon as possible. If the chiller dies, we have to replace it at once. Money is not to be an issue here.
Money for this purpose is called, aptly, the reserve fund, and is not to be an issue here because, by law, i.e., by the Condominium Act 1998 [1], each condominium corporation has to have a reserve fund for these major (read “expensive”) repairs and replacements. [2]
Where does this money come from? It comes from your contribution to the common expenses each month, commonly referred to as the “management fee.” [3]
That means we have to save enough money for these “rainy days.” Money saved for this purposes (i.e., big repairs and replacements) are put under an account separate from the money used for daily operations (such as paying for janitorial services, management office expenses, landscaping expenses, or snow removal services).
But how do we know that we have enough money in the reserve fund? Read on.
Notes:
[1] Condominium Act 1998, Section 93, Subsection (1): “The corporation shall establish and maintain one or more reserve funds.”
[2] Condominium Act 1998, Section 93, Subsection (2): “A reserve fund shall be used solely for the purpose of major repair and replacement of the common elements and assets of the corporation.”
[3] Condominium Act 1998, Section 93, subsection (4): “The corporation shall collect contributions to the reserve fund from the owners, as part of their contributions to the common expenses.”
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