Following the Champlain Tower collapse in Surfside in 2021 and the legislation that followed in 2022, condo buyers have made it a priority to understand a building’s reserves before they purchase a condo. What exactly are condo reserves and why should you pay attention?
What are Condo Reserves and Why are They Needed?
Reserves are simply money put aside by the association to cover major updates or replacements of key building components when they reach end of life. For example, if a building’s exterior paint and waterproofing is expected to last 10 years and will cost $1,000,000 to repaint the building, then the association needs to save $100,000 every year. At the end of year 10 they will have $1,000,000 saved, enough to do the repainting without extra funding.
Why The Attention on Reserves Now?
Prior to 2022 condos could vote on whether or not to reserve funds and many chose not to. The result was that when a critical building component failed or needed maintenance, there was no money set aside. The association would raise a Special Assessment , a compulsory assessment levied on every unit owner, on top of the regular monthly assessment. Unit owners were hit with large bills they had to pay, and in some cases it encouraged deferring critical maintenance and repairs. The legislation forced associations to build sufficient reserves covering at least the following:
- Roof
- Building structure and load bearing elements
- Fire protection
- Plumbing
- Electrical
- Waterproofing and exterior painting
- Windows and exterior doors
- Anything else deemed a major critical building component
How Does An Association Know How Much to Reserve?
A Structural Integrity Reserve Study (SIRS) lists the key components and estimates the remaining life and replacement cost. It then accounts for any existing reserves and estimates how much needs to be collected every month from unit owners to be fully funded. This report is created by an architect or engineer. It’s made a little more complicated as associations are allowed to pool reserves for those key components above. This means they can have one reserve account covering all components, so long as there is enough to cover maintenance and replacement.
The Bottom Line
It’s critical you understand a condo’s reserves before you make a purchase. Are they reserving enough to pay for future building maintenance and repair? If not you will be hit with large Special Assessments sometime in the future. Read more on condo documents you should review before making an offer →
If you are considering buying or selling a condo in St Pete, Pinellas County or the greater Tampa Bay area work with a Realtor that understands how to navigate the potentially expensive pitfalls.
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