What is a Reserve Fund Study?
A Reserve Fund Study (RFS) is a guideline for board discussions, for the purpose of making well informed decisions and to plan replacements and set condo fees for the next five years (per the Alberta Condominium Act). It is useful as a budget planning tool which analyses the current reserve fund and expected future expenses. It consists of a Physical Inspection of the facilities and a Financial Analysis of the reserve fund.
The Study is reported in two parts:
PART ONE is a snapshot of the current conditions of the major components of the common areas of a condo building/community. (Example: shingles, siding, fencing, boiler). Site measurements and inventory are taken during the site visit(s). Information is collected from the board or property manager, regarding upcoming replacements and/or issues regarding ongoing or premature deterioration of certain component(s).
PART TWO is a financial snapshot. Financial data is gathered. This information is supplied by the board or Property Management. (For instance: balance of the reserves, dates, total annual operating costs, # of members, plans, etc). Local prices, typical life cycles of major components and remaining service life of each component are derived from site visits, cost/data tables and actual trade quotes. With careful reviews, 10 summaries and reports (graphs/tables) are calculated, detailing the predicted replacement components, for which year, and the balance of the reserve for each of the next 30 years.
Specific reports will appeal more to one board member over others dependant on the board roles. . If there are years with a shortfall, a special assessment(s) is recommended.
Maintenance contingencies are included in the study, promoting pro-active operations versus re-active. Contingencies are set up for regular maintenance programs including inspections, tune-ups, and building envelope sealant program.
Do you need an Annual Update?
Associated Home & Building Inspections believes that funding studies are an essential part of property management. People and property are constantly changing and evolving. As a result, the useful life of a funding study is at best a few years, and certainly not more than five years. An Annual Update…..
You are in need of an Annual Update:
- if there have been changes in interest rates
- if there have been changes in inflation rates
- if there have been changes in the number of dues paying members
- before starting new improvements
- before making changes to the property
- after a flood or fire
- after the change of ownership or management
- after Annexation or Incorporation
- there has been an unexpected occurrence regarding a major component
BENEFITS of an annual update:
- Your 5-year RFS renewal date is extended.
- With more frequent calculations, your study is always current, maintaining compliance with the Condominium Property Act, and avoiding the lapse of your 5-year study.
- Cost is a fraction of a 5-year Reserve Fund Study*
- Unknown of ‘How much is enough’, is clarified, enabling you to make confident, informed decisions.
- Reduce costly surprises, due to unpredictable fluctuations in construction labour and materials.
*A reduced cost is applied to an Annual Update when a complete 5-year Reserve Fund Study was performed by Associated Home & Building Inspections Ltd. If a request for an early RFS with no special circumstances or concerns, a similar reduced cost will apply.
View RFS Glossary