P.T. from Erie County, New York writes:
Dear Mister Condo,
Regarding a condominium’s capital reserves: when an owner sells his unit, is he also entitled to receiving a credit from the purchaser for the amount of capital reserves (the pro-rata amount based on the total number of units) on account at time of the sale? The logic here is that the seller has been funding capital reserves during his ownership term so that capital items (siding, roofing, driveways, etc., as defined in the offering plan) can be replaced and paid for at some future time. As with real estate taxes, which are paid annually in advance, the seller will receive a credit for the taxes paid but not “used” if the unit is sold during that particular tax year. Thanks in advance.
Mister Condo replies:
P.T., that is an interesting way of looking at Reserve Fund contributions but I am not aware of any condo or HOA that handles it that way. In fact, the wear and tear on items that are repaired using Reserve Fund contributions are ongoing every minute of every day. The fact that they will be paid for in the future has no effect on the daily decay and degradation of the common elements that occurs every day. Even though the funds are not spent as soon as they are deposited for, they are most certainly spoken for. Reserve Fund contributions are nothing like taxes and should not be treated as such, in my opinion. Thanks for the question!