Maintaining the Value of Condominium Buildings
Reserve fund studies are an essential tool in planning for the long-term maintenance of Condominium buildings. This article presents the current state of Provincial regulation of reserve funding and study reporting in Canada, and the value of long-term maintenance planning .
The Canadian Context
Nova Scotia is not alone in requiring reserve fund studies: as shown in the following table, the majority of Canadian Provinces do, or soon will, require some form of study to protect the investment of condominium owners.
|Province||Statutes require a Reserve Fund?||Regulations require Reserve Fund study||Year Regulated||Required Frequency  (years)||Required Frequency of Update||Financial Reporting Method(s)|
|British Columbia||Yes||(soon) |
|Saskatchewan||Yes||Yes||2001||(10)||n/a||equity and cash|
|Ontario||Yes||Yes||2001||n/a||3 (6)||cash reserve|
|Quebec||Yes + ||No|
|New Brunswick||Yes||Yes||2011||10||3 (3-9)||cash reserve|
|Prince Edward Island||No|
|Nova Scotia||Yes||Yes||2000||10||(5)||equity and cash|
Long-Term Maintenance Planning
Looking at the role of property condition assessments for Condominiums, my three points in this article are:
- A well-reasoned reserve fund study is worth having,
- The extent to which reserve fund studies are used as work plans needs to be understood, and
- Perhaps it’s time for mandatory accreditation of reserve fund study providers.
Reserve fund studies are important in that, typically, they determine between 25 and 50% of most Condominium fees.
In Nova Scotia, studies or updates are required every five years for condominiums with ten or more units; they include (a) an on-site assessment by a qualified professional of what is required to maintain the condominiums common elements – pavements, landscaping, walls, windows, structure, roof, etc.; (b) a forecast of the cost of this work over the next 20 years, as a minimum; and (c) through collaboration with the condominium owners, a schedule for funding these repair costs.
Life is much simpler for condominium owners and their board members if funds are available for major refurbishments when they are needed, and if contributions are predictable.
To the second point, reserve funds are used for major expenditures only, e.g., window replacements and tree trimming. Most items in can be planned and budgeted with some accuracy over several years and, as the year approaches for the item to be carried out, site assessments will estimate the budget year and the cost more precisely. Site assessments may be useful in deciding on work in the current and following year, but should be considered a guide only, with decreasing precision, for future years.
Ultimately, a leaking roof or broken fence posts may determine when repairs are done; it is better to be funded ahead of time to have the cash when needed - both for planned work and for unplanned contingencies.
The last point is connected to the first two. The value of reserve fund studies to the owner lies in the quality and frequency of the on-site assessment and report. My personal opinion is that Nova Scotia, Ontario and Alberta’s requirements of on-site assessments every 5-6 years strike a good balance between the required scope of service, the skill-set of the service provider, and the value to the Condominium. The expected qualifications of assessors could be bench-marked using this time-frame, and CCI can play a stronger role in promoting the appropriate registration and continuing accreditation requirements for assessors.
We all like reliance – on relationships, our surroundings, investments, our abilities. We’re motivated to maintain or improve our environment, and we measure success in terms of how far forward and solid our planning is. It’s inspiring to see the care given by many building managers to the life-cycle management of everything from pumps to pavements: predictive maintenance inspections; routine maintenance programming; replacement planning; conservation threat assessments etc... it should be possible to be assured of a reliable reserve fund!
Jim Fletcher is an engineer practicing in the area of building physical assessments in Nova Scotia, PEI and New Brunswick; he is a professional affiliate of CCI’s Nova Scotia Chapter.