Even well-run buildings can face a reserve shortfall. The good news is there are three ways to handle it — and the right choice depends mostly on how far away the project is.
Special assessment
A special assessment makes up the shortfall with a cash call to all owners based on unit factor. It works, but it forces owners to use personal capital or credit facilities, and it can be a serious burden — especially for those who recently bought in.
Increase fees
If the shortfall is five or more years out, there's the option to increase fees so more flows into the reserve over time. The best strategy is often a three-year catch-up, then a return to inflationary increases. If the project is less than five years away, increasing fees alone usually isn't enough.
Condo loan
A condo loan is a good option many owners aren't aware of. It results in increased fees, but owners don't have to use personal credit facilities, and they only pay the loan while they live in the condo — the obligation passes to the next owner. It spreads a large, one-time cost across the years the asset is actually being used.
Choosing well is a judgment call with lasting consequences. Reserve Plus and myRPlanner (powered by StelorPM) help boards model each option so they can see the impact on fees and cash flow before deciding.