What type of expenses does the Reserve Fund need to anticipate?

The Reserve Fund is meant to handle future capital expenses that are necessary for a property’s upkeep and maintenance over time. These capital expenses often include significant costs such as roof replacements, major plumbing repairs, painting, or other long-term improvements that enhance the value and functionality of the property.

By anticipating capital expenses, the Reserve Fund ensures that the property corporation is financially prepared for expenditures that cannot be easily funded through regular operating budgets. These costs tend to be substantial and infrequent, distinguishing them from ongoing operational costs or routine maintenance expenses that are budgeted more regularly.

In contrast, operational costs are typically covered through normal income generated by the property and are associated with the day-to-day functioning of the property. Marketing expenses for vacant units target occupancy levels and are part of operational costs rather than reserves for capital expenditures. Similarly, direct costs related to tenant leasing are involved in managing lease agreements and securing new tenants, which again falls under operational rather than capital expenses. Therefore, only capital expenses are appropriate for consideration in the Reserve Fund.