“When you get a copy of the reserve fund and study, be sure to ask lots of questions and make sure the person who did (the study) is qualified,” says Bernie Winter, of Condo-Check, and author of 10 Secrets to Surviving Life in a Condominium.

In a nutshell, a reserve fund is money set aside to provide for the repair and replacement of major parts of the common property as they break down – such as roofs, fences, boilers or heating systems and pipes. Officially dubbed the Capital Replacement Reserve Fund, the money is generally held in secure but liquid investments, and is not intended to cover regular or annual maintenance.

The reserve fund study – which lays out what and when items need to be replaced – was mandated in 2000 under the Alberta Condominium Act, and specifies that every building must have one completed and reported within two years of its condominium plan being registered.

Because these forecasts for maintenance and replacements are “an educated best guess” it is crucial for would-be condo buyers, as well as current condo owners and boards, to ensure the inspector is qualified, says Winter. “Since anyone who the board sees as qualified can do it, you have to look at who prepared it and what their qualifications are.” While property managers or appraisers may also provide the service Winter advises hiring an engineer – preferably one with structural or building construction expertise – whenever possible.Cost for the studies vary, but can range from hundreds of dollars for a small building to tens of thousands for condominiums with suites in the hundreds, she estimates. But the old adage “you get what you pay for,” applies here, as a cheaper assessment may just cost owners in the long run should something crucial be overlooked. Conversely, a building component deemed needing an overhaul when it could wait chips away at reserve fund dollars that could be better spent, says Winter. And having the reserve study done is just the tip of the iceberg, especially where condo conversions or older buildings are concerned, she warns. Interested condo dwellers are urged to see if items assessed as needing repairs or replacements are followed through with by the developer before they move in to their new-to-them condo address.While developers generally mean well, sometimes costs grow in refurbishing a building, and items can get left out of the facelift, which may in the end come back to bite owners in the long run, warns Winter.

And a brand-new condo apartment-style structure or townhouse development may have all new components, but that doesn’t mean residents’ pocketbooks are free and clear. While most new condominium developers are good about contributing, hence saving buyers from starting from scratch where the reserve fund is concerned, they are not required to by any means.

Being a little wary when condo fees are low might not be a bad idea either, says Winter, as this can be an indications of boards possibly not accounting for the future.

“If you look at the Condo Act, there is no such thing as ‘condo fees,’ these are owners’ contributions toward maintaining their investment, and that’s how they should look at it,” says Winter, adding higher fees, if handled properly, can hurt less than a large bill in the future when something needs replacing.

She advises, along with the reserve study, checking to see if the operating budget’s numbers and projections add up. Sometimes a board may have done due diligence to have a study for the corporation’s projected costs, but stopped short of spending the money to fix components – which can amount to a large cash call for owners when something gives out, such as the roof.

“I had one (reserve fund plan) that I looked at recently, and it was a 20-year-old building with no expenses for 15 years. You have to look at the budget and the inspector’s report and make sure they complement each other,” explains Winter.

The good news is, for the condo shopper to whom all the paperwork for their investment seems too daunting, a number of professional document review services, including Winter’s (http://www.condo-check.com), are in place to help out.

As part of the service, in addition to looking to ensure reserve fund studies and funds are in order, the financial health of the condo corporation is also examined, along with bylaws and condo plans for the project, so buyers can ease into their new investment with some peace of mind.  CL