July 2020
Misconceptions about the purpose of a reserve fund are magnified by attempts to keep condo fees as low as possible.
When a candidate for election to the board campaigns on a platform to reduce condo fees, it is best to ignore them. Don’t believe these claims. They may as well promise to eliminate all condo fees. It simply is not possible to reduce condo fees without sacrificing something.
Condo directors don’t have enough control over expenses to make any such promise. Most expenses are determined by the market. No condo director or board can reduce the cost of labour, utilities, supplies or equipment which comprise more than 90 percent of all expenditures in the condo budget.
Condo fees can be reduced, and increases can be avoided, by reducing reserve fund contributions and neglecting current obligations. Director candidates campaigning under a platform to reduce condo fees fail to recognize or acknowledge they seek to create a problem others will have to clean up.
The reserve fund is not a rainy-day fund. It is not a source of cash when funds get low. Its sole purpose is to maintain what currently exists. Depleting the reserve fund for any purpose differing from its intent is irresponsible. This includes revising reserve fund assumptions or line items to justify changes to its funding.
One of the obligations of condo directors is to ensure an adequate reserve fund. Those refusing to accept this obligation should not seek election as a condo director. Such a policy virtually assures special assessments, dramatic condo fee increases, or borrowing money a few years later.
