Reserves for Mixed Use Building & Limited Common Elements

Often condo declarations state that some building components are to be paid for exclusively by one group of owners. This may include all residential owners, or all owners within a single building. This means that reserve contributions for those components must come only from the units to which the cost is allocated. We frequently see reserve studies where all the components are mixed into a single study and a single pot of reserves, then used to pay for components that only some owners have an obligation to pay for. This often happens in mixed use buildings, where commercial and parking owners do not pay for residential hallways, lobbies, and elevators. Reserve Study Professionals do not know how the building components are paid for (and certainly cannot give a legal opinion on that matter), and usually put all building components into one large calculation, which has the effect of some owners paying more than they should, and others not paying enough. In some associations, the cost for repair and replacement of limited common elements such as windows, doors, decks, and even plumbing in the wall of the unit, are allocated to the owner to whom the limited common element is assigned. Often Reserve Studies have the wrong boundary for what each owner pays for, resulting in substantially over or under funding future expenses that the association must pay for. Please have an attorney look at your declaration and determine if the components in your reserve study are the right ones. Often Boards are surprised to learn that the reserve study has been collecting money and funding repairs incorrectly for many years, and correcting that has its own set of challenges. The key is in your individual condominium declaration. If you cannot understand it, or it is inconsistent with what your community wants, seek legal advice to clarify and revise the documents. If you have any questions we can answer, please feel free to leave a comment or contact us directly. We look forward to continuing this conversation with you in our future posts.