Dear Paul: Our Reserve Fund Study was completed 2 years ago. What do we do with it now?
Dear E.P.: As you know a reserve fund study (RFS) is similar to a savings account that you will be able to use when you encounter a major or unexpected expense. No one counts on the roof shingles blowing away in a windstorm or your car engine to die. If you do not have that special savings account to fall back on, you may face a difficult financial situation. Once the RFS is completed, it will create a road map for your condo board to plan for major repairs. Each year the board should review the RFS and determine what needs to be fixed or replaced. Even if the RFS indicates that an item is at the end of its useful life, it does not mean that it must be attended to immediately. It is an important guide that tells the board what to keep a closer eye on. The item may not be dead yet, but it might be closing in on its final days.
When the budget is being drafted for the next year, the RFS will provide the information needed to decide whether or not to increase common element fees, not only to cover increasing operating costs, but also whether or not the RFS is sufficiently healthy to cover the upcoming large one-time outlay. It is an important financial planning tool. Use it as such.