The reserve fund study takes place after the inspection of the condominium building. The building engineer calculates the cost of major repairs and/or replacement of key components, based on their lifespan and condition. Finally, they produce the reserve fund report.
The reserve fund schedule should be reviewed every 5 years to adjust the calculations to reality, as the lifespan of building components can differ from the theoretically calculated lifespan, depending on the quality of the construction materials used. Furthermore, the replacement costs of major building components vary over time. For example, a poorly installed French drain can become clogged and ineffective after only a few years, even if its theoretical lifespan is approximately 25 years. Similarly, an asphalt and gravel roof can deteriorate after 8 years due to a lack of regular maintenance, despite its theoretical lifespan being 20 years. It is also important to remember that the prices of construction materials and labor have increased significantly recently.
Ultimately, sufficient funds in the condominium association's account are essential to ensure that necessary maintenance and replacement work is carried out on the building's components. This prevents the inconvenience of having to pay a special assessment for the co-owners . Even with a reserve fund, a special assessment may still be required for major repairs, but it will be less of a burden for the condo owners.
Steps to create a provident fund:
- A general inspection (pre-acceptance or certificate of building status) of the common portions with respect to the major components of the building, in order to determine the current condition of those components.
- An assessment of the probable lifespan of the major components of the building.
- A cost estimate for repair and replacement work based on the current condition of the components and their lifespan.
- A financial analysis to determine the amount of the contribution of each co-owner.
- The creation of a report or a table containing the different components studied, the costs of the work and the required contributions.
Provident fund