What do reserve funds provide for in property management?

Reserve funds play a critical role in the financial management of a property, particularly in the context of condominiums. Their primary purpose is to ensure enough resources are available for future major repairs and replacements, such as roof replacements, boiler repairs, or any other significant capital improvements that are expected over the lifespan of the property.

By setting aside money in reserve funds, a condominium corporation prepares for these large expenses, which might not occur annually but can be quite substantial when they do arise. This proactive financial planning helps to avoid unexpected special assessments or the need for owners to contribute significant sums on short notice when major repairs are required. Reserve funds help ensure the long-term sustainability and maintenance of the property, contributing to its overall value and appeal.

In contrast, emergency repairs are typically handled through the operating budget or contingency funds, while routine maintenance is funded by regular operating expenditures. Operating expenses themselves deal with the everyday costs of running the property, which are not the focus of reserve funds. Therefore, reserve funds are specifically geared toward saving for those significant repairs that are anticipated in the future.