• Buying - a prospective buyer needs to ensure there is a reserve report and funding to cover future maintenance and repairs​

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• Living - if you are living in a condo and proper reserving has not occurred, owners find they are facing an assessment

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• Selling - having a solid reserve report and funded program will help sell a unit

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One of the most important responsibilities of your condominium board of directors is facing the responsibility of future effectively planning for major common-area repairs and replacements. Whether a costly expenditure is needed in a few years or not for 10, or 20 years, it’s the board’s fiduciary duty to make sure your condominium corporation has adequate funds when the time comes. That’s where reserve funds come into play.
 
There are many misperceptions about reserve funds and the role a reserve study plays in planning your corporation’s future expenditures, so we’ve broken it down for you.
 
What exactly is a reserve fund?  A reserve fund is an account where money is put aside to pay for large capital expenses that are expected to occur over the next 30 years. This money is exclusively allocated for in segregated funds for common-property components that have a limited useful life. Just think of it as insurance.  Let's say you have a roof needing replacing.  Depending on the condo it can easily cost $100,000 to $300,000.  If you do not have those funds in the bank then you are faced with obtaining funds to replace it.  That can only come from implementing an assessment or loan.

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Remember, if you live in a condo, you are a building owner.  When you own your own home, you can make a decision and it only affects your family.  In a condominium, you are affecting many families.  So you need money available to replace expensive items (typically those that cost more than $10,000) and make major repairs to roofs, mechanical equipment, garages, amenities and other common areas when the time comes.

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Washington State requires a reserve report for most condos every year.  An on-site review every three years and an update financial review each year. The most current reserve report should be disclosed to a buyer at the time of offer*.  Read it carefully, then review the segregated reserve dollars in the financial statement and see where the condo is in their cycle.  A wise buyer, owner, or selling should consider this a must.  If you're buying, don't be bashful, ask for the details.

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* The Washington State legislature recently revised the reserve requirements, first amending in RCW 64.34.380, and now in RCW 64.90.555.  If you have any questions about this issue, like any other legal issues, you should raise this issue with your attorney.

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