A very ongoing question, since default in condominiums happens very often, fees increase every month and budget is never balanced.
Even though your reserve fund has a lot of money in it, usually, it is not supposed to cover default.
A reserve fund is meant to pay for extraordinary and unexpected expenses, such as leaking or clogged pipes etc. To cover condominium’s extra expenses, avoiding extra fees in case of emergency.
Explaining. Even though every condominium resident should contribute monthly with the reserve fund, it can only be used in very extraordinary situations, and not for regular expenses. For that reason, the fund can neither be used for salaries and other payments, to cover water and power bills, nor for paying regular taxes. All these expenses should be covered by the regular condominium fee, and not by the reserve fund.
Generally fixed between 5% and 10% over condominium fee, the reserve fund is established and regulated by condominium agreement, internal regulation or even deliberative assembly. Specifying in what situations the fund can be used, and how the transaction will be authorized and supervised.
The reserve fund payment is mandatory for all the condominium residents, landlords or tenants. Once raised, the fund belongs to the condominium, not being able to be distributed among residents or even refunded in case of transferred ownership.