Reserve Funds

April 8, 2025 Published by Golden Horseshoe Chapter - By Tyler Brook

Small Sites – Major Project Impacts

From the Volume 23, Spring 2025 issue of the CCI GHC Condo News Magazine

Smaller condominium sites can be desirable: the quiet roadways of a small townhouse site, less congestion in the low-rise elevator each morning, or a better chance for a tight-knit community of residents. Sometimes labelled as ‘boutique’, these types of condominium locations can be sought after for their smaller size, exclusivity, or just the perceived simplicity of transitioning from a previous lifestyle in a single-family home to a small cluster of homes. Smaller condominiums in the order of 10 to 25 units or less (we have come across condominium sites with as little as 2 or 3 units) can face challenges unique to their size, including those related to the repair and maintenance of the site over the long term and how major capital projects are tackled.

Big Projects at Small Sites

From our perspective as building science engineers, when undertaking detailed assessments or construction review of a project, the overall size of a site small or large, does not always relate to the size of the complexity or scope of the work. In some cases, plans for work at small sites can involve similar or even more layers of complexity than encountered at larger sites. Challenges can include inherently having less space for contractors to set up and stage their working areas or store construction equipment. This can necessitate higher mobilization needs based on shuttling equipment back and forth to the site daily. Where everyone can temporarily park their cars during the project can be a challenge with no extra space on the site.

There can also be less opportunity to leverage the communal aspect of condominium living: economies of scale. With capital projects having less magnitude of work, such as a smaller area of windows to be replaced, or fewer light poles to swap out for new ones, the economies can be less than those enjoyed by larger sites. The relatively fixed project costs often blended into contractor’s pricing such as preparation of engineered shop drawings, and set up costs for custom windows or doors, along with routine coordination and oversight, can become more costly on a per-unit basis.

Given that projects can be more costly on a per-unit basis at smaller sites, adequate planning and execution are key to making sure the reserve funds are spent with care. Proper assessment, specifications, and tendering of any project, large or small can have similar levels of effort, meaning the cost for professional assistance at the planning stage can be a higher proportion of overall project costs when completing smaller projects. However, investment in that initial assessment and planning stage can be a true difference-maker for any project. The value of a good plan can end up being quite high at smaller sites as it can be more important to ‘get it right the first time.’ They often have less flexibility financially or otherwise to absorb the fallout from poorly executed projects, making investment in proper planning for smooth project execution an important consideration.

Capital Planning – No Small Task

While small condominium sites can enjoy smaller capital costs overall, reserve fund planning can be a more delicate tightrope to walk. From an investment perspective, the reserve funds at a smaller site may have a reduced range of choices for investment products given the lesser balances carried in the fund. Reserve fund preparers must be diligent in reflecting a reasonable and prudent investing approach within the corporation’s reserve fund study to not overstate anticipated interest earnings. Something we also see as capital planning engineers is corporations asking to remove smaller items from their reserve fund studies based on these items being handled through the annual operating budget to keep reserve contributions lower. Small corporations typically have less wiggle room on the operating budget side of the ledgers so this approach must be taken carefully.

Proper planning is essential as smaller sites carry a reduced balance in their reserve funds as they save toward capital projects. When something unanticipated occurs such as a water main break or leakage issues, the impact can be drastic. There are simply fewer funds earmarked for capital projects that can be shuffled around to accommodate urgent issues. This can be magnified at common element sites where there are even fewer items that the corporation is responsible for, creating less financial flexibility. These impacts on small sites can have a more significant impact on the ownership than at larger sites just due to fewer owners bearing the burden of the costs.

How can small sites avoid surprises in their capital costs? It must be said that lately, avoiding surprises in planning capital expenditure seems a luxury given the remarkably high and unanticipated inflation in building repair costs experienced over the past years. Proper and frequent reserve fund study updates along with suitably qualified detailed assessment of site and building components as they begin to reach the end of their normal serviceable lives are so important to make sure sites are staying on track, even with the changing goal-posts brought on by high inflation recently. These on-site assessments and studies can go a long way to anticipating issues in advance and making prudent plans for the long-term maintenance and repair of condominium sites, small or large.

While we all want fees to be low, overly manipulating reserve fund studies with the intent to keep fees lower in the short term nearly always backfires, resulting in higher fees later. More prudent planning can help avoid or at least lessen the impact of cash crunches, but this likely requires some ‘tough conversations’ between property owners and the board of directors, management, and service providers.

Smaller condominiums inherently have fewer resources to draw on and fewer individuals to fund their reserves and their day-to-day operations. It must be stated however that professional property management is still extremely valuable at these smaller sites. There can be the perception that at smaller sites an active Board of Directors can take on all the management duties to save a few dollars, however, this can end up being more costly on the whole. Even the smallest condominium sites are essentially multi-million-dollar assets that few Board members, let alone entire condominium Boards, have the experience to manage on their own.

Even long tenured Board members with deep knowledge of their building sites can lack the professional network of contacts to get things done well and save their communities money overall. Solid property management can help small sites and provide a good return on the investment in their services, particularly over the long term.

Tyler Brook is a Senior Capital Planning Engineer at Brown & Beattie Ltd. responsible for the technical assessment and financial planning analysis involved in conducting and overseeing countless Reserve Fund Studies and Performance Audits throughout the GTA and southwestern Ontario built on a foundation of building restoration project management experience in completing construction review and administration for a wide variety of building types. Brown & Beattie Ltd. provides professional services and expertise specializing in building maintenance, restoration, improvement and sustainability by listening to client objectives and clearly explaining technical issues. We assist our clients in achieving useable plans and sensible results.