What is a Condo Reserve Fund?
A condominium reserve fund is similar to a savings account where you keep some money saved up for emergencies. Massachusetts law regarding condominiums mandates that condominium associations maintain a reserve fund.
“All condominiums shall be required to maintain an adequate replacement reserve fund, collected as part of the common expenses and deposited in an account or accounts separate and segregated from operating funds.”
Condo reserves are funds that are collected when the condo is sold to its first owner. Condo fees equal to two months are collected from the person buying the condo and submitted to the Condo Owners’ Association.
Why Do You Need Condo Reserve Funds?
As an owner, condo reserves funds help you maintain a steady fund of money that can be used in times of contingencies or emergencies that might otherwise cause waste of time in dealing with important issues.
Meet Legal Requirements
As stated above, it is required by MA law that all condo associations set aside a reserve fund for times of emergency. By doing so, you are complying with the law and performing your condo duties properly and without incurring any fines or problems.
Prepared for Repairs and Other Emergencies
Condos require repair and maintenance just like any other apartment or home. In many cases, major repairs such as roof replacement or heating system replacement will require a large amount of funds. A reserve fund will assist you in such times and make sure you do not delay the repair due to lack of funds thus causing safety concerns.
Boost the Re-sale Value of Your Condo
As property managers and real estate agents in Boston, we are aware of the need for reserve funds just like most other people working in this business. If you do not have adequate reserve funds, companies like us will not want to work with you because we know the problems that can be caused by inadequate funds. In order to maximize the re-sale value of your condo, you will require to provide proof of the reserve funds in order to satisfy the buyer.
Avoid Borrowing and Incurring Debt
One of the major reasons that condo owners need to have reserve funds is to avoid the need to borrow money and thus incur debts. At a time of emergency, coming up with large amounts of money can be quite a problem and if you do not have enough in your reserve funds, you will need to borrow money. This can be avoided by putting away some amount every month into the reserve fund and saving yourself the trouble of finding a borrower and then paying them back.