What’s a condo reserve fund and why is it important?

When you’re buying a condo, one thing you should pay VERY close attention to is the condo corporation’s reserve fund. That’s their “emergency savings” – a special account that’s separate from their regular operating fund. A percentage of your maintenance fees go towards building it up, and it’s used for big repairs like new windows, structural stuff, roof or driveway repairs, etc. It can also be used if there’s a lawsuit involving the condo corporation. 

If there isn’t enough money in the fund to cover an expense, as an owner, you could be on the hook for something called a “special assessment.” This one-time payment is split among all the owners – and it’s above and beyond your regular maintenance fees. Special assessments can be a very unpleasant surprise, potentially costing you tens of thousands you hadn’t budgeted for. 

And they aren’t exclusive to older buildings – owners in newer condos can get hit with them as well. So while aging buildings are likely to have more big repairs on the horizon, it all comes down to having a well-managed condo corporation: you want a board that has saved intelligently and planned ahead to cover big expenses. 

How do I find out if a condo has a good reserve fund? 

When you’re thinking about buying a place, your agent will ensure a real estate lawyer takes a close look at the building’s status certificate. That will tell them if there’s a healthy reserve fund (among other things). If your lawyer gives the reserve fund a failing grade, you have a couple of choices. One, you say “no thanks” and step away from the purchase. Or two, you can still go ahead and buy, but with your eyes open. 

“A status certificate that many buyers might walk away from can be an investor opportunity,” says Adam Hoffman, Sales Representative. “For some buildings it can be harder to get financing, which cuts out a big chunk of the buyer pool. So there’s less competition – and a lower price. Some buyers will go into these buildings anticipating additional costs in the hopes that over time, the challenges get resolved and the amount they put in ultimately proves profitable. My role as an agent is to equip buyers with the knowledge they need to make an informed decision.”