Reserve Fund Study

What is a Reserve Fund Study?

A Reserve Fund Study is a financial planning process to ensure that sufficient funds are available throughout the life of a project to provide replacement or repairs of the common elements and assets of a corporation or organization.

The intent is to have owners or stakeholders pay their proportionate share of these component costs based on their period of ownership and to offset any irregular non-annual expenses by ongoing regular contributions. This sustains the long term financial health of the improvements through a funding strategy designed to cover future expenditures.

Why have Reliance complete your Reserve Fund Study?

Reliance has adopted the standards set out by the Real Estate Institute of Canada, which is considered as the most advanced reserve fund planning system in Canada through their Certified Reserve Planner (CRP) professional designation. The study is compliant with provincial statutes and typically has a 25-year planning horizon.

Every property or project is unique in physical and financial characteristics. Reliance's commitment is to listen to and work closely with the boards, councils or management companies to provide the most flexible and very best options that will ensure a financial strategy that results in a healthy reserve fund.

Reliance's planning analysis is readily understood, and can easily deal with problematic scenarios such as apartment/townhouse and commercial/residential mixed developments or developments with significant time intervals between various phases.

What is the Process?

The steps in the process include identifying, inspecting and quantifying the common elements including assessing their effective age/life cycle. A benchmark analysis is then developed which sets out the optimum reserve fund contributions. A historical profile is added into the calculations in order to ascertain what financial expenditures have already occurred. The cash flow projection then takes into consideration the inflation and interest rate trends. This cash flow projection sets out effectively the actual cash flow requirements over a 25-year horizon through an appropriate level of contributions.

A reserve fund study once adopted by a corporation or organization is then presented as a final report and becomes the plan. A reserve fund study is relied upon by potential buyers who are becoming more astute as to the significance of this document and its very direct impact on values. It is incumbent on the corporation to review the planning process as required by statute or on a five-year maximum basis.