As we start 2021 we thought it’d be worth looking back at an important aspect of strata budgets: reserve fund contributions. This is the amount that is set aside for repair or replacement of assets that occur less than annually, such as replacing a roof, upgrading an elevator or repairing roads. Expenditures are usually identified in advance through a depreciation report, and the reserve funds are designed to cover the costs when necessary.
The picture around reserve fund contributions is more encouraging than we anticipated: strata corporations have been putting aside an average of nearly 17% of their operating budgets. This is above our expectations and the prevailing 10% recommended by the Strata Property Act regulations – though the latter is being reviewed and expected to increase. Here is the average of the reserve contributions as a percent of operating budgets in Eli Report over the past two years:
2020: 16.9% (average $70.0k per strata)
2019: 17.7% (average $63.5k per strata)
As you can see, despite a slightly lower percentage stratas have managed to put more dollars aside into their CRF in 2020 budgets vs 2019 in spite of the increased burden of insurance premiums…10% more. This is a positive sign as stratas with healthy reserve funds are less likely to charge special assessments.
We took a deeper dive looking at the average contributions per unit, as for owners this is a relevant figure. From this analysis we see that 2020 annual reserve contributions averaged approximately $700 (~$60/mo) per unit, out of total unit strata budgets of $4,800 (~$400/mo) per unit. If that feels steep, know that some reserve contributions were in the thousands of dollars – either funding a significant project or replenishing low reserves!
Finally, in terms of CRF balances, while the average dropped slighly (by less than 2%) in 2020, the median inched up by a similar margin, so those have remained fairly stable.
If you are curious about how your strata compares as an owner or member of your strata council, sign up here to obtain a free Eli Report.
As a prospective buyer performing due diligence on a strata community, you can always get a free Eli Report from your realtor.