A reserve fund is used to pay for the major repairs and replacement of common property, such as replacing the roof or painting the outside of the building. It is regulated that the monies from the reserve fund can only pay for major expenses and not for emergencies or unexpected expenses. A contingency fund should be set up for these purposes.
All owners must contribute appropriately to the reserve fund. Typically, a portion of each owner’s Condominium fees are directed into the reserve fund on a monthly basis, but some Corporations could choose to do it by special assessment on a quarterly or semi-annual basis. Condominium Corporations may not mortgage the common elements to raise money for major repairs and replacements; they are usually funded through reserve fund fees and special assessments only.
As of January 1, 2010, all Condominiums are required to have a reserve fund. However, the Act will allow Condominium Corporations existing before January 1, 2010, to have five years to build a reserve fund.
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