Contingency Funds and Its Importance by Geraldine Santiago
A contingency fund is a reserve fund set aside for to handle an unexpected repair outside the usual operating budget. Contingency funds are typically used in strata titled ownership. If, for example, there is a situation that arises such as a flood or emergency elevator repair that the budget did not account for in the fiscal year, then strata owners may have to use all or part of the contingency for the repair. Governments use this contingency fund and is called a disaster recovery fund.
When buying a strata titled property, lilke a condo, a townhome, a duplex, it is necessary to find out just how much is in the contingency fund. The healthier amount, the better as you are now, as the future owner, going to own part of that fund. Previous owners cannot take their proportion of unused funds away when they sell.
For those first time home buyers purchasing a single detached home, unfortunately, there is no such thing as a contingency fund. Here, owners can either prepare for repairs or neglect them altogether. It's your home. You can do as much or as little as you want when it comes to repairs.
However, I urge all home buyers to reserve in some way or another some of their funds for a rainy day. Make a payment plan with your bank to withdraw $100 or so a month that you do not touch unless you have an unexpected repair for your property. This foresight will help you when you need to access these funds and you do not have to get into debt to have these repairs done.