Reserve fees are often misunderstood as just another cost of condo living. In reality, they're how a community fairly pays for the wear and tear happening right now — and the single best defence against a future special assessment.
The reserve fund is an asset you own
The reserve fund is an asset of the condo corporation. Each owner effectively owns a percentage of the reserve and all the commonly owned property based on their unit factor. The fees that go into the reserve become part of that investment.
You're paying for annual deterioration
By paying reserve fees, owners are paying for the deterioration occurring to commonly owned property each year — effectively leasing the capital replacement while they live there. It's the fair way to share the cost of a roof, boiler or elevator across everyone who benefits from it over its life.
It's how you avoid special assessments
A funding plan that relies on special assessments or cash calls forces today's owners to pay for the entire design life of capital projects that happen to come due while they live there. A properly funded reserve spreads that cost smoothly and predictably — which is exactly what protects owners from sudden, painful cash calls.