Here are some high-level answers to some of the most common questions we get from our customers. For more information on our reserve fund studies, please contact us or request a reserve fund study quote online.
- What is included in a reserve fund study?
- What do reserve fund studies cost?
- How do you determine what future repair costs will be?
- What is a Notice of Future Funding?
- How do I know the reserve fund study is accurate?
1. What is included in a reserve fund study?
A study will provide some or all of the following, depending on the class:
A physical analysis of the property:
- Inventory of assets, common elements, and shared facilities
- Review of maintenance and/or repair records
- Site inspection to confirm building condition by our engineers and technicians
- Year of acquisition
- Present age
- Normal life expectancy
- Assessment of the remaining life expectancy including adjustments for condition
- Estimated year for repair or replacement
- Estimated total replacement cost
- Proportionate share if applicable
- Percent of replacement cost to be reserved if total replacement is unlikely
- Adjusted replacement cost of each item as of date of the study
A financial analysis of the reserve fund:
- Cash flow projections up to 60 years if needed
- Opening balance
- Recommended contributions for each fiscal period that are destined to reach annual increases in the order of the provincial consumer price index as quickly as possible, preferably in the first decade
- Indications of any needed other contributions such as loans, operating transfers, borrowing proceeds, or special assessments
- Planned future value of expenditures, including loan repayments for any borrowing that may have been required. Our future values take into account published construction price indexes for various census metropolitan areas and calculations from there for suburban and rural areas as may be applicable
- Estimates of interest earnings based on the average of the opening and closing balances being available for investment at rates equivalent to short-, medium-, and long-term GIC rates.
- Closing balance
2. What do reserve fund studies cost?
The cost is determined by the size, location, and type of construction comprising the corporation assets and common elements. Generally speaking, reserve fund studies start at a few thousand dollars. You’ll find that when you compare price quotes, McIntosh Perry is very competitively priced. Click to request a reserve fund study quote online.
3. How do you determine what future repair costs will be?
We start with two great assets: our materials science expertise and our extensive database of real-world replacement costs. These help us determine when the repair or replacement of your building’s assets will need to happen, and what the starting cost will be. Future major repair and replacement costs are determined on four levels of information:
- Actual historical data relative to the property; if you know how much it cost to replace your roof last time we work with that
- Contractor quotations, based on professionally prepared specifications and details, for the repair or replacement of the common element components that may not have been implemented yet – we usually add in a contingency to reflect the possibility that completing the proposed work may cost more than planned, if not already included in the base bids
- Similar data from nearby sites, our extensive database of real-world replacement costs combined with our materials science expertise make these estimates very reliable
- Cost estimates based on authentic published cost sources (such as RS Means) combined with our quantity take-offs of the common elements
These costs are then adjusted for factors like changes in the building construction price indexes for: Census metropolitan areas, urban, suburban, or rural localities as applicable to your property.
4. What is a Notice of Future Funding?
It used to be known in Ontario as the Form 15. This is a document presented to the condo unit owners that includes a summary of the study, summary of the current and future plan for contributions to reserve, and notice of any deviations from the recommended plan that the board may have decided to implement.
5. How do I know the reserve fund study is accurate?
Some key points to check include:
- ARC/Unit – the adjusted reserve cost per unit is usually in the $65K to $130K range depending on the size, type, location, and quality of the corporation’s assets. Variations from this range may be explained by the unit boundaries, shared facilities, or unique founding document characteristics.
- Min CB – the minimum closing balance is an indicator of risk tolerance for the board – we recommend no lower than $500/unit though one client asked us to set it at the level of their last special assessment that another consultant told them to implement.
- Max CB – there is no valid reason for planning to save more money than the adjusted reserve cost for the major repair and replacements of the common elements
- Max RL – the maximum remaining life of the assets versus the plan duration should capture at least one cycle of major repair
Working with these key points, we check, and cross-check, a number of ratios and indexes to be sure that the proposed plan is rational, sensible, and palatable to all current and future owners.
If you’d like the experts at McIntosh Perry to quote on your reserve fund study, contact us today. You can call us toll free 1-888-348-8991.