New York State Real Estate Salesperson Licensing Exam

What is the name of a budget allocated for repairs and major renovations?

1. Operating budget

2. Capital reserve budget

3. Annual budget

4. Maintenance budget

The correct answer is: Capital reserve budget

The capital reserve budget refers specifically to a budget that is allocated for significant repairs, renovations, and replacements of major components within a property. This type of budget is essential for long-term planning, as it ensures that sufficient funds are available to maintain the value and functionality of the property over time. This is especially important for condominium associations, cooperatives, and larger property management situations where significant expenses can arise and must be anticipated. In contrast, the operating budget generally covers ongoing costs related to the day-to-day management and operation of the property, such as utilities, maintenance, and property management fees, rather than major repairs. The annual budget typically encompasses both operating and capital reserve budgets for the year, but it does not specifically highlight the portion allocated for major repairs. The maintenance budget, while closely related to the upkeep of the property, usually focuses on routine maintenance tasks rather than the larger, one-time expenses covered by a capital reserve budget. Hence, the capital reserve budget is the most accurate option in the context of allocating funds for repairs and major renovations.