Welcome to Condo’s Corner

by Daulton Read, OLCM

Issue #006

Get ready for a weekly dive into condo living like never before with Condos Corner. Speaking from my perspective as a Condo Manager, my goal is to entertain and provide valuable management insights and stories that can help you live your condo life a bit better—all with a little bit of wit, charm, and practicality.

What’s Happening This Week?

My breakdown of the reserve fund and reserve fund study!

Dault’s first must-read pick

Send those questions in!

Manager’s Memo: The Reserve Fund and Reserve Fund Studies!

Hey Condo Crew! Let’s talk about the dollars and sense behind managing your condo’s financials, specifically, the all-important reserve fund. Strap in—this is where the nitty-gritty of condo and project management meets the bottom line.

According to the Condominiums Act 1998, all condos must have a reserve fund to ensure there’s money for big projects. The reserve fund sets aside money for non-routine repairs and replacements of common elements. This might include replacing the roof or HVAC system or a major repair to the swimming pool. So exactly how does a reserve fund work and what is it used for?

Let’s dive in!

What Is a Reserve Fund Study?

Are you familiar with the concept of a reserve fund? Well, let me tell you all about it! A reserve fund is like your emergency savings account that helps you pay for unexpected expenses beyond the regular operational budget. Every month, a portion of the maintenance fees is set aside to contribute to this fund, ensuring that it remains accessible in case of an emergency. 

Condo boards must conduct a reserve fund study every three years to ensure that enough money is available and budgeted in the reserve fund. This study is completed by an engineering firm and helps to assess the common elements and make accurate projections for timelines of when these projects may be required, and the funding required for future issues. It’s like getting a crystal ball for the big ticket items!

What Does a Reserve Fund Cover?

As buildings age, they require and need to plan for major renewal projects that involve significant costs. These projects can range from generator replacements and elevator overhauls to major garage renovations, buried service repairs, and exterior overhauls. On the other hand, newer buildings need different types of expenditures, such as replacing roofs, pumps or parts for the pool, playground equipment in common area parks, rotted-out fencing, and walkway improvements.

As the building or property ages, more involved and costly projects are required. However, reserve fund studies come in handy to help forecast and track these costs, ensuring that the necessary funds remain available, and avoid those special assessments that everyone hates!

Operation Fund vs Reserve Fund

Did you know that understanding what the reserve fund doesn’t cover is just as important as understanding what it covers? 

The reserve fund can’t be used to pay for operational expenses, so it’s essential to know which expenses fall under this category. For instance, contracted services like regular landscaping maintenance, plumbing, or security, along with insurance, taxes, legal fees, accounting, utility expenses, and administrative expenses are all examples of operational costs that aren’t covered by the reserve fund. 

Knowing these expenses can help you plan better and avoid any unpleasant surprises.

How Does a Reserve Fund Remain Successful?

Navigating a reserve fund study and rising costs as a condo manager can feel like a never-ending battle. So, what’s a savvy manager to do? The key to a successful reserve fund lies in heeding the advice of engineers and other professionals and using their forecasts as a North Star. By following their guidance, you can ensure your fund is sufficiently stocked to weather any storm, whether it’s a surprise repair or a major overhaul.

The Importance of the Reserve Fund Study

It’s important to ensure that each property’s specific needs are met, and as a building ages, more and more money will need to be allocated to the reserve fund. If this isn’t done, it becomes difficult for the reserve fund to cover increased costs. It is also important to gradually chip away at these large projects so that the building does not become dated! For example, lobby renovations or a board room renovation may seem like something that is more cosmetic and less important than a make-up air unit replacement, but these projects are strategically timed so that they can be undertaken before other major projects arise. The last thing you want is to need to do everything at once!

To avoid the need for larger jumps to cover major projects, a successful reserve fund should build in gradual increases over time. Did you know that the required percentage contribution of all condo fees to the reserve fund can increase from 10 percent for a new building to as much as 25 to 30 percent for a building that is 20 years old? But what happens if unexpected issues arise and funds are not available? In that case, a special assessment must be conducted. 

By understanding how a reserve fund works, and following the advice of professionals, you can ensure that your property is well-maintained and that there are no surprises down the road.

Daulton’s Picks: Atomic Habits by James Clear

Atomic Habits is a great book that is fairly simple, showing that you don’t need to make these massive, drastic changes to see real results in life. Instead, it’s all about those small, consistent habits that seem insignificant at first but stack up over time.

Link: https://amzn.to/3yq4Osl

Clear breaks it down with the Four Laws of Behaviour Change: 1) Make it obvious, 2) Make it attractive, 3) Make it easy, and 4) Make it satisfying. He gives you practical tips on how to apply each law, like habit stacking, temptation bundling, and getting an accountability buddy to keep you on track.

One of the key takeaways is to focus on your systems, not just your goals. Setting ambitious targets is cool, but real change happens when you build the right habits and routines that’ll naturally get you there. It’s also about aligning your habits with the person you want to become, not just checking boxes.

Overall, Atomic Habits is a game-changer if you’re looking to build better habits and ditch the ones holding you back. I highly recommend reading it if you’re serious about self-improvement and personal growth.

Do you have a condo tale to tell or burning questions about condo living? Don’t be shy—share them with me! Whether it’s a funny story, a management mystery, a celebratory story, or just a nightmare, we’re all ears. Respond to this email so we can keep the content coming.

Make sure to share this newsletter with your friends, family, and, more importantly – that neighbour who could learn a few things!