How to Read a Condo’s Reserve Fund Study (Without Falling Asleep)
The Boring Document That Can Save You Thousands
Let’s be honest. Few things make condo buyers’ eyes glaze over faster than the words “reserve fund study.” Just the phrase alone sounds like it belongs in a dusty binder locked away in some lawyer’s office. Most buyers would rather jump straight to the fun stuff like balconies, rooftop terraces, ocean views than comb through a financial report filled with tables, graphs, and engineering jargon.
But here’s the thing: the reserve fund study might be the single most important document you’ll read before buying a condo. Why? Because it shows whether the building has the financial health to keep running smoothly, or whether you’re walking into a money pit that could hit you with surprise bills for tens of thousands of dollars.
The good news: once you understand how these studies are set up, they’re not nearly as intimidating as they look. In fact, with a little guidance, you’ll know exactly what to look for, which numbers matter most, and which red flags should make you think twice about signing on the dotted line.
This guide will break down how to read a condo’s reserve fund study without falling asleep and more importantly, how to use it to make a smart, financially sound buying decision.
What Is a Reserve Fund Study, Anyway?
At its core, a reserve fund study is a long-term financial plan for the condo building. Think of it like a savings roadmap: it looks at all the major components of the property like the roof, windows, elevators, boilers, parking garage, balconies, and so on and estimates when each will need repair or replacement, and calculates how much money should be set aside each year to cover those costs.
The study is typically prepared by engineers or reserve fund specialists and must be updated every few years (the exact timing depends on provincial regulations). It answers three big questions:
What is the condition of the building right now?
How much will future repairs and replacements cost?
Does the condo corporation have enough money saved—or are fee increases and special assessments on the horizon?
If you think of condo fees as your “monthly membership dues,” the reserve fund study is the blueprint that determines how high those dues should be.
Why It Matters for Condo Buyers
When you buy a condo, you’re not just buying four walls and a ceiling. You’re buying into a shared ownership structure that includes the building’s finances. If the reserve fund is strong, you’ll enjoy predictable condo fees, well-maintained amenities, and peace of mind.
If the reserve fund is weak, you could be staring down one of every condo owner’s worst nightmares: the special assessment.
A special assessment is a one-time charge levied on owners when the building doesn’t have enough money saved. Imagine moving into your dream condo and six months later getting a letter that says:
“Dear Owners, The parking garage requires urgent repairs. Each unit will be responsible for $18,000, payable within 90 days.”
It happens. And it’s exactly why understanding the reserve fund study matters so much before you buy.
The Three Big Parts of a Reserve Fund Study
Every study has its quirks, but most follow the same three-part structure.
1. The Physical Analysis
This section is like a health check-up for the building. Engineers walk through and inspect everything from the roof to the foundation. They note the age, condition, and expected remaining lifespan of all major components.
2. The Financial Analysis
Here you’ll see the current balance of the reserve fund (the condo’s “savings account”) along with projections of how money will flow in (owner contributions through condo fees) and out (repair and replacement costs).
3. The Funding Plan
This is where the rubber meets the road. The funding plan lays out how much money needs to be collected in future condo fees to keep the fund healthy. It may recommend gradual increases, occasional jumps, or, if things look bad, immediate changes.
How to Read a Reserve Fund Study (Without Falling Asleep)
The trick is knowing what to skim and what to zero in on. Here’s how to cut through the fluff.
Skip the boilerplate. The first few pages often contain legal disclaimers, methodology, and background you don’t need.
Focus on the summary tables and charts. These will usually show key timelines for repairs and fund balances at a glance.
Circle the “big-ticket items.” Look at when the roof, windows, elevators, HVAC systems, and parking garage are scheduled for replacement. These are the most expensive projects.
Compare costs to cash. If the roof is due in three years but the fund doesn’t have nearly enough saved, that’s a red flag.
Look at the recommended fee increases. Is the study suggesting modest annual bumps (say, 2-3%) or dramatic hikes (10%+)?
Think of it like skimming for headlines rather than reading every single word.
The Numbers That Matter Most
When you’re scanning a reserve fund study, these are the figures you want to pay attention to:
Current Reserve Balance – How much money is in the bank right now?
Percent Funded – A measure of how well the fund is keeping up with projected needs. (Experts say 70–100% is healthy; under 50% could mean trouble.)
Contribution Rate – How much is being added each year from condo fees.
Projected Expenses – What major costs are coming up in the next 5–10 years?
Funding Plan Recommendations – Does the plan suggest fee increases, and if so, how steep?
Common Red Flags to Watch For
Not all reserve fund studies are created equal. Here are some warning signs that should make you ask more questions:
Low Percentage Funded – Anything under 50% means the building is playing catch-up.
Major Repairs with No Money Saved – A roof replacement due next year but a near-empty fund is a bad sign.
Frequent Special Assessments in the Past – If owners have been hit repeatedly, expect it to continue.
Unrealistic Assumptions – If inflation, interest rates, or repair costs seem underestimated, the plan may be too optimistic.
How to Use a Reserve Fund Study in Negotiation
Here’s the part most buyers don’t realize: a reserve fund study isn’t just for your own peace of mind—it’s a negotiation tool.
If the study shows a big repair coming soon with no funds set aside, you might negotiate a lower purchase price to offset future costs.
If the building is underfunded, you can budget for higher condo fees and adjust your offer accordingly.
On the flip side, a well-funded reserve is a selling point. You may feel more confident paying full asking price knowing the building is financially sound.
Smart Questions to Ask the Condo Board or Property Manager
Don’t just read the study—use it as a springboard for questions:
When was the last reserve fund study completed?
How often do you update it?
Are the board and management following the recommendations?
Have there been any special assessments in the past 5 years?
What fee increases are planned in the near future?
The answers will tell you whether the numbers in the report are being taken seriously or ignored.
Why the Local Context Matters
In Canada, each province has its own rules for how often reserve fund studies must be conducted and updated. For example:
Ontario requires updates every three years.
Alberta every five years.
Nova Scotia recently updated condo legislation to improve transparency, and requires condo corporations to conduct a reserve fund study every 5 years.
If you’re buying in an older city building, pay extra attention to upcoming big-ticket replacements like windows and balconies. In newer buildings, the fund may look strong simply because nothing major has worn out yet, but that doesn’t mean big costs aren’t coming down the road.
Final Thoughts: Don’t Skip the “Boring” Stuff
A condo’s reserve fund study might not be glamorous, but it’s one of the most powerful tools you have as a buyer. It tells you whether your dream condo will stay affordable or whether you’ll be hit with unpleasant financial surprises.
So take the time to skim it smartly, circle the red flags, and ask the right questions. And if all else fails? Partner with a real estate professional who reads these documents every day and knows how to spot the warning signs.
Because when it comes to buying a condo, falling asleep on the reserve fund study could be the most expensive nap you’ll ever take.
Author: Jordan Gunn
Operations & Marketing
Perkins Real Estate
Keller Williams Select Realty