What is a Reserve Fund and How Should it Be Funded?

Introduction

Every building ages. Roofs wear out. Boilers fail. Parking lots crack. These aren’t surprises — they’re predictable costs that every condominium corporation will eventually face. The question isn’t whether they’ll happen. It’s whether you’ll have the money ready when they do.

What it Is

A reserve fund is money set aside specifically for major future repairs and replacements of common property. It’s separate from the operating fund. In Saskatchewan, maintaining a reserve fund is a legal requirement under the Condominium Property Act.

How it Gets Funded

Each month, a portion of every unit owner’s condo fees flows into the reserve fund. The amount is determined by a reserve fund study — a professional assessment of the building’s major components, their condition, their expected lifespan, and the cost to replace them.

What Underfunding Looks Like

When a major repair hits and there isn’t enough in the reserve, the board’s options are limited:

• A special assessment — a surprise bill to every unit owner
• A loan — which costs money and takes time to arrange
• Deferred maintenance — which makes the problem worse

What Good Reserve Fund Management Looks Like

• A current reserve fund study, updated every 3-5 years
• Monthly contributions made consistently and recorded separately
• A board that reviews reserve fund status at every meeting
• An accounting system that tracks reserve fund activity independently

The Fund Accounting Connection

When your reserve fund is tracked as a completely separate fund in your accounting system, there’s no ambiguity. The balance is clear. The contributions are visible. And nobody accidentally pays an operating expense out of the reserve.

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Disclaimer: For general informational purposes only. Not legal, financial, accounting, or tax advice.