In one sentence
A lender-held reserve funding future major repairs and replacements, sized from the property condition assessment.
The longer version
Also called a replacement reserve, the capex reserve escrows money over time for roofs, systems, and structure so the collateral does not decay. The property condition assessment sets the funding schedule.
Releases against completed work are recurring servicing requests with documentation requirements, effectively small draw packages that repeat over the loan's life.
Common questions
- What is a capital expenditure reserve?
- A lender-held reserve funded monthly to pay for major repairs and replacements over the loan term, such as roofs, parking and building systems.
- How is a capex reserve sized?
- From the property condition assessment's schedule of expected replacements over the loan term, usually expressed as a per-unit or per-square-foot annual amount.
- How does a borrower draw from the capex reserve?
- By submitting a request with invoices and lien waivers for completed work. The lender reimburses eligible costs under the loan agreement's release conditions.
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