Why a Healthy Contingency Reserve Fund Matters in a Strata Building

When buyers look at condos and townhomes, they usually focus on price, layout, and monthly strata fees. One of the most important factors often gets overlooked: the contingency reserve fund, commonly called the CRF.

The CRF is essentially the building’s long term savings account. It exists to pay for major repairs and replacements that every building will eventually face. Roofs age, pipes corrode, balconies deteriorate, elevators fail, and parking membranes wear out. These are not surprises. They are predictable lifecycle expenses.

A well funded contingency reserve protects owners from sudden financial shocks and helps maintain property value.

⸻

What the CRF Actually Pays For

The CRF covers capital expenses, not day to day maintenance. Think large scale projects, including:

    •    Roof replacement

    •    Exterior siding and envelope repairs

    •    Balcony repairs and waterproofing

    •    Elevator modernization

    •    Plumbing and repiping

    •    Parking garage membrane replacement

    •    Windows and doors

    •    Boilers and HVAC systems

These items often cost hundreds of thousands, sometimes millions of dollars. No building can collect that amount through monthly strata fees alone at the time the work is needed. That is why the reserve fund exists.

⸻

What Happens When the Fund Is Too Low

If the contingency reserve is inadequate, the building still has to complete repairs. Safety and structural integrity are not optional.

Instead of using savings, owners receive a special levy. A special levy is a one time charge divided among owners to pay for repairs immediately. Depending on the project, this can range from a few thousand dollars to over six figures per unit.

This creates three major problems:

    1.    Financial stress for owners

Not everyone can suddenly produce large sums of money.

    2.    Financing risk for buyers

Lenders become cautious about buildings with a history of levies or low reserves.

    3.    Lower resale value

Buyers avoid buildings with financial instability, which affects marketability and price.

⸻

Why Buyers Should Care

A healthy CRF is a strong indicator of responsible management and long term planning. It tells you the strata council understands future costs and is preparing for them gradually instead of reacting in crisis mode.

When reviewing strata documents, you are not just checking for past problems. You are evaluating future risk. A building with proper reserve funding is usually quieter financially. Fees may be slightly higher, but owners avoid sudden and unpredictable expenses.

In many cases, higher strata fees paired with a strong reserve fund are actually safer than low fees with an empty savings account.

⸻

The Bottom Line

Every building will need major repairs. The only question is how they will be paid for.

A healthy contingency reserve spreads costs over time, protects owners from large levies, supports financing approval, and preserves property value. It is one of the most important financial indicators in a strata purchase and one buyers should always understand before removing subjects.

When buying into a strata, you are not just purchasing a home. You are joining a shared financial partnership. The contingency reserve fund tells you whether that partnership is prepared for the future