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What is a Proper Reserve Fund Study?
A Reserve Fund Study is a long term funding plan that assesses all common area components as defined by the corporation’s by-laws and condominium plan to ensure there are sufficient funds available to make major repairs and/or replace those components at the end of their life expectancy. Properly prepared it can be utilized by the Condominium Board for budgeting for those long term expenditures and building components that do not occur every year. The specific requirements for the study are described in the Condominium Act and Regulations.
A Reserve Fund Study can include but is not limited to the following:
- Building exterior: roof cladding, exterior cladding, entrance doors, eaves troughs and downspouts, etc.
- Building interior: flooring, painting, furnishings, furniture and recreational equipment, elevators, heating, air conditioning, make-up air, fire alarm, voice communication and security system, etc.
- Grounds: roadways, parking lots, sidewalks, fences, underground utilities water, sewer and electrical, refuse garbage containers, etc.
- Special facilities: recreation centers, swimming pools, playgrounds, etc.
Who Needs to do a Reserve Fund Study?
A Reserve Fund Study is required by all condominiums with over 12 residential units.
How often does it need to be done?
A reserve fund study shall be conducted by a qualified person:
- Within three years after the date of the corporation’s first annual meeting was convened in accordance with Section 38; and
- Every five years after the initial reserve fund study.
For additional clarification please refer to the Condominium Property Act 1993, see section 58.1
Benefits of a Reserve Fund Study:
- Identifies the current finances of the condominium corporation and provides a long term plan to ensure future common area components are funded as replacement is required.
- Ensures that current unit owners pay their proportionate share of common area component replacement costs based on their period of ownership.
- Provides a basis for Condominium Boards to ensure that contributions are fair and equitable meeting the needs of current and future owners.
- Provides a long term plan identifying anticipated replacement of common area components based on their anticipated life expectancy.
- The Reserve Fund Plan should reduce the risk of requiring special assessments to meet fund short falls in the future.
- It should prolong the economic life of the building common area components through properly schedule maintenance and repairs.
- Will ease prospective purchasers level of comfort knowing the condominium board has a professionally prepared study identifying a plan to maintain the value of the property.
- Increase the value of the property and ease of sale over similar properties without a properly funded reserve fund.
- Reduce Condominium Board liability with respect to properly managing the condominium corporation.
About Reserve Fund Studies:
Qualifications & Requirements
A qualified person is an individual who holds liability insurance in a minimum amount of $1,000,000 and, based on reasonable and objective criteria, is knowledgeable with respect to:
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- Components or a particular type of component;
- The operation and maintenance of components or a particular type of component; and
- The costs of replacement of or repairs to components or a particular type of component; and incl
- A licensed applied science technologist within the meaning of The Saskatchewan Applied Science Technologists and Technicians Act;
- A member of the Appraisal Institute of Canada holding the designation of Accredited Appraiser Canadian Institute;
- A person who holds a certificate of practice within the meaning of The Architects Act, 1996;
- A member of the Real Estate Institute of Canada holding the designation of Certified Reserve Planner; and
- A licensed professional engineer within the meaning of The Engineering and Geoscience Professions Act.
See: The Condominium Property Regulations, 2001, 51.1 (d) for additional details and clarification
The reserve fund studies are written in a clear, concise, non-technical, reader friendly style enabling the reader to understand the building, its construction, and the importance and operation of the common area components.
The report consists of three parts:
Executive Summary identifying the findings of the report along with the recommendations
Physical Description and analysis consisting of:
- 1. Physical inventory of all common area components.
- 2.Physical description of the common area components complete with a
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- Description of the component, Condition Analysis, identify the current condition of the equipment
- Colour photograph of the component and, if identified, issues related to the component
- Recommendation on: life expectancy, remaining life, and recommended date of replacement,
- 3. Identify actual and effective age, remaining life expectancy,
Financial Analysis consisting of:
- 1. Provide a statement of assumptions regarding inflation, interest, maintenance and affordability in the context of quality and expense that were made in the physical analysis.
- 2. Identify current and future replacement costs for each component.
- 3. Comment on sufficiency of the existing reserve fund at current levels and provide for future expenditures.
- 4. Provides a 25 year Cash Flow Projection as per legislated requirements identifying when major expenditures will be made.
- 5. Determine the recommended annual contribution required to be put in to the reserve fund to adequately provide for expenditures of major repair or replacement of common area components over the legislated 25 year time frame.
- 6. Provides two draft Cash Flow scenarios to identify how to properly finance the reserve fund.
- 7. Where possible tailor and finalize a Cash Flow scenario identifying the Condominium Boards preferred financing option and reflect this option in the Form FF required by the
Condominium Property Act 1993.
The Reserve Fund Study Report
What We Require From You
In order to complete a Reserve Fund Study, we require the following information:
- Access to the physical condominium property.
- Access to blueprints/construction drawings; site plans, architectural, structural, mechanical and electrical.
- A copy of the condominium plan and bylaws.
- Information about, and access to, all relevant documentation pertaining to, remove, repairs and maintenance carried out and/or ongoing projects relating to various building systems (structural, electrical and mechanical).
- Copies of the most recent audited financial statements, current reserve fund contributions and balance, and planned expenditures in the short term.
- Copies of any previous reserve fund studies completed.
- Historic information regarding the condominium complex and any problems experienced, and planned changes (physical and financial) to the complex and/or its various components.
A completed copy of the tas Quote Checklist found below.
Once a project is awarded; tas will:
- Set up a meeting and conduct interviews with the Condominium Board or their designated representative(s) to gather information regarding historic maintenance issues and/or any planned changes to the physical property
- Conduct a site inspection of the condominium property; buildings, grounds and roadways, etc. to view the common area components to identify their condition, and gain a thorough understanding of the property.
- Review the corporation’s architectural, structural, mechanical, electrical, landscaping and site services plans.
- Review the condominium plan and bylaws, technical reports and/or documentation available, and maintenance contracts and/or any other documentation available with respect to the maintenance, repair and replacement of components.
- Review current, historic and budgeted financial statements.
- Prepare a draft report and submit it to the Condominium Board for review.
Follow Up & Support
After the Condominium Board has reviewed the draft reserve fund study, we will meet with the Board to:
- Answer questions in regards to the report,
- Identify how and why recommendations were made,
- Provide alternate funding options based on discussions with the Board.
Upon completion of the report, two bound printed colour copies of the report and an electronic PDF copy on a memory stick will be provided.
The Process Once its Awarded
Condo’s We’ve Assessed
Resources
CCI-Canadian Condominium Institute
The Canadian Condominium Institute is the voice of the condominium in Canada. It is a national, independent, non-profit organization dealing exclusively with condominium issues. It represents all participants in the condominium community working through chapters throughout the country. It coordinates concerns for condominiums corporations by being a national voice, provides education, publications, workshops, conferences and technical support.
Brunsdon Lawrek
Brunsdon Lawrek & Associates and its predecessors have been providing real estate appraisal, consulting and counseling services to its clients since the early 1950s. The prime objective is to provide quality service, on time, and at a cost consistent with the complexity of the assignment and the type of project. Their specialties include Residential Appraisals, Commercial Appraisals, Property Tax Consulting, Reserve Fund Studies, and Litigation Support.
Affiliations:
About REIC & CRP
The Real Estate Institute of Canada (REIC) is the only national provider of advanced education and designation in the real estate industry sectors. It has been educating and certifying specialists since 1955. Members are highly trained industrial professionals bound by the Institutes Bylaws and Code of Professional Standards. A member must meet rigorous admissions, education and practical experience requirements and maintain membership with REIC.
CRP – Certified Reserve Planner
The designation is the preeminent designation signifying professionalism with expertise to complete reserve fund studies and depreciation reports for condominiums, institutions, corporations and government entities. The designation is recognized across Canada.
About BOMI & FMA
Founded in 1974 the Building Owners and Managers Institute (BOMI) is the leader in providing education, providing consistent, high quality education and skill enhancing and learning opportunities for professionals in commercial property and facility management/operations in Canada.
Facilities Management Administrator (FMA)
The designation develops skills in strategic planning, corporate finance, project management, corporate finance, capital investment and physical asset management. It enables the facilities administrator to create a quality work environment that maximized productivity and knowledge in the industry.