Full Cover or Calculated Risk? Setting the Right Funding Level for Your LTMP

“We know we’re not fully funded, but is that actually a problem?” It’s a question we hear more often than you might expect, usually from a committee that has just inherited a plan that’s been coasting for years, or one that’s staring down an unexpected six-figure repair bill and wondering how to pay for it without hitting owners with a special levy. The answer almost always comes back to a single number: the funding level.

What is a funding level?

A funding level represents the percentage of your plan’s provisions, meaning the future maintenance costs your Long-Term Maintenance Plan has identified, that your contributions are actually designed to fund. In a robust, fully funded plan, contributions are set to cover 100% of provisions, so that by the time an item needs replacing or repairing, the money required is already sitting in the fund. In some situations, however, a committee will deliberately set that figure lower, say 75%, meaning contributions are only designed to cover three quarters of the future costs the plan has identified, with the remainder to be addressed later.

Why would a committee choose a reduced funding level?

Reducing the funding level is rarely about avoiding responsibility, it’s usually a considered response to a specific set of circumstances:

• Inheriting a distressed plan: a committee taking over a plan that has been underfunded or under-scoped for years faces a choice between an immediate, often uncomfortably large jump in contributions to catch up, or a more gradual, managed path back to full funding.
• Absorbing a large, unexpected expense: a sudden, substantial cost, such as an urgent weathertightness repair, can leave a committee choosing between demanding an enormous one-off sum from owners at short notice, or spreading the impact by temporarily easing off the funding level.
• A deliberate risk-management choice: some committees choose to run at a slightly reduced funding level as an ongoing strategy rather than a temporary response, effectively self-insuring a portion of future costs in exchange for lower contributions today, reflecting their own read of the building’s risk profile and their appetite for it.

The case for a reduced funding level

Used deliberately and transparently, a reduced funding level can be a genuinely sensible tool rather than a way of kicking the can down the road:

• Immediate relief for owners: it keeps contributions manageable during a period when the full obligation would be unaffordable, or simply hard to get owners to agree to.
• A realistic path back to full health: a phased increase over the medium term is often far more sustainable, and easier for owners to plan their own finances around, than one large step back to 100% funding.
• Reflects the committee’s actual risk appetite: rather than defaulting to 100% funding regardless of circumstances, a committee can align its funding strategy with its own considered view of the building’s condition and risk.
• Avoids forcing a special levy at the worst possible time: easing the funding level can be the difference between a manageable adjustment and an emergency levy landing on owners just when they can least absorb it.

The trade-offs

None of this is free, and a reduced funding level carries real risks that need to be managed with just as much rigour as the decision to adopt one in the first place:

• A thinner buffer against further surprises: running below 100% funded leaves less headroom to absorb another unexpected cost while you’re still catching up from the last one.
• The shortfall doesn’t disappear: it has to be recovered later, meaning contributions in future years will need to rise faster to make up the ground not covered today.
• Perception and transparency risk: prospective buyers, lenders, or auditors reviewing the plan may see a sub-100% funding level as a red flag if it isn’t clearly explained, time-bound, and backed by a credible plan to return to full funding.
• It only works with discipline: a reduced funding level is a legitimate short to medium term strategy, not a permanent substitute for full funding, and without a committed glide path back to 100% it can quietly drift on indefinitely.

Getting back to full health: the glide path

The situations described above, such as a distressed plan or an unplanned expense, are rarely permanent, and neither should the reduced funding level be. A well-run strategy sets out a clear glide path: starting at a lower level such as 35% in the short term, stepping it up gradually over the medium term, and returning to 100% over the medium to long term. Documenting and communicating this glide path to owners is what separates a considered financial strategy from simply deferring a problem, and it gives everyone, including future committees, a clear benchmark to be held to.

Seeing the impact before you commit

This is exactly the kind of decision Commonview’s new Funding Level feature was designed to support. Rather than working through the numbers manually or relying on a professional to model a handful of scenarios, committees and professionals can adjust the funding level and instantly simulate its impact on the entire plan in seconds. That means you can compare a 35% starting point against a staged return to 100% over five years, or test several glide paths side by side, and see exactly what each option means for contributions, timing, and risk, before adopting one.

So, in a nutshell…

A funding level below 100% isn’t automatically a red flag, and it isn’t automatically prudent either, it depends entirely on why it was chosen and how deliberately it’s being managed back to full health. Used as a considered, time-bound response to a distressed plan, an unplanned expense, or a genuine risk-management strategy, a reduced funding level can protect owners from an unaffordable shock today. Left undocumented and open-ended, it quietly becomes tomorrow’s distressed plan. The difference between the two comes down to having a clear glide path and the ability to see, in real numbers, exactly what it means for your building.