Search Results for: reserve Fund Study

Condominium corporations cannot use their reserve funds to make capital improvements, except under certain circumstances.  For example, if a special resolution allows for it. Or there are health, building/maintenance and occupancy standards to follow under the law. In such situations, there must also be sufficient funds remaining in the reserve fund.

Reserve funds must be in separate accounts, and cannot mix with the corporation’s operating funds. Money from a corporation’s reserve fund also cannot mix with any other corporation’s reserve fund or with any other money.

Money collected for the reserve fund cannot be returned to owners. Any surplus collected stays in the reserve fund. For example, a condominium corporation repairs the roof but it takes less money from the reserve funds than anticipated. In such a situation, the corporation cannot return the surplus funds to the owners. When a condo corporation terminates (ends), different rules about the return of reserve funds may apply. You should always seek legal advice when dealing with this type of situation.

A reserve fund study is a physical inspection of the condominium’s depreciating property (for example, roof, heating system, entrance doors, etc.) done every 5 years.

A reserve fund report is a written document outlining all of the findings from the reserve fund study.

When a condominium plan is first registered, the condominium corporation has 2 years following the registration to complete a reserve fund study and report.

When conducting a reserve fund study, the reserve fund study provider must:

• Determine the current amount of funds in the corporation’s reserve fund.
• Conduct an on-site visual inspection of depreciating property
• Interview board members, managers for the corporation, employees or any other person
• Review relevant documents such as the condominium plan, construction documents and maintenance records

Tip for condo boards: It is a good idea for boards to keep a schedule of when they will need to do a reserve fund study and plan well in advance to find a suitable reserve fund study provider to complete the study.

Condo corporations must hire a reserve fund study provider to complete the study. A reserve fund study provider is someone who is permitted to act as a reserve fund provider under the Condominium Property Regulation. They must be knowledgeable about depreciating (declining) property, including its operation, maintenance, and the costs of replacing or repairing it. For example, only the following people are qualified as a reserve fund study provider under the Condominium Property Regulation:

• A professional engineer
• A professional technologist
• A certified technologist under the ASET Regulation who holds a certificate of registration as a certified engineering technologist or applied science technologist
• A registered engineering technologist under the ASET Regulation
• A registered architect
• A person who is a member of the Appraisal Institute of Canada and has an Accredited Appraiser Canadian Institute designation
• A person who is a member of the Canadian National Association of Real Estate Appraisers and has a Designated Reserve Planner or Designated Appraiser Commercial designation
• A person who is a member of the Canadian Institute of Quantity Surveyors and has a Professional Quantity Surveyor designation
• A person who has a certificate from the Reserve Fund Planning Program at the University of British Columbia
• An individual who has successfully completed training or who has qualifications recognized by the Director (under the Condominium Property Act)

A qualified reserve fund study provider can have staff working on the reserve fund study – even if the staff do not meet the qualification under the Regulation.

Tip for condo boards: Do your due diligence and research before retaining a reserve fund study provider or entering into a contract with them. For example, experts recommend that boards do reference checks. You can also ask for samples of reserve fund plans the provider has recently completed.

Certain individuals are not allowed to act as a reserve fund study provider, for example:

• A director, officer or employee of the corporation
• A manager under a management agreement with the corporation
• A partner, employer or employee of a director, officer, employee or manager with the corporation
• A spouse or common-law partner of a director or officer of the corporation
• A child of a director or officer of the corporation
• A child of the spouse or common-law partner of a director or officer of the corporation
• An owner of a unit
• An occupant of a unit

Contracts for a reserve fund study entered into before January 1, 2020 (the date that the new reserve fund study provider qualifications come into force) are still valid.

If a condominium has 12 units or less, the condo corporation can carry out the study itself. A special resolution must allow the corporation to conduct the study. However, experts highly recommend that, whenever possible, a reserve fund study provider should conduct the study and prepare the report.

Under the Condominium Property Regulation, a corporation is exempt from retaining a reserve fund study provider to prepare a reserve fund study and from establishing or maintaining a reserve fund if:

• The certificate of title to each unit is registered in the name of:
  • the same owner or
  • the same group of owners and
• The units are rented or offered for rent to persons as tenants who are not purchasers/not intended to be purchasers.

The reserve fund report outlines the findings of the reserve fund study. The following information must include:

• The qualifications of whoever did the reserve fund study and prepared the report
• A signed statement that the person completing the reserve fund study is a reserve fund study provider and is not disqualified under the Condominium Property Regulation
• Findings of the reserve fund study relating to the following matters:
  • An inventory of all depreciating property that may need repair or replacement within the next 30 years (or a time period longer than 30 years). For example:
    • roof
    • siding
    • heating and cooling systems
    • plumbing and
    • electrical systems
  • For each piece of listed depreciating property:
    • a description of its current condition
    • an estimate of when it will need repair or replacement
    • an estimate of the cost of repairs or replacement
    • the estimated life expectancy after repair or replacement
  • The amount currently in the reserve fund
  • On site visual inspection of visible components of the depreciating property
  • Interviews with board members
  • Interviews with board members, managers for the corporation, employees or any other person
  • Review of relevant documents such as the condominium plan, converted property study or building assessment report (if applicable), construction documents and maintenance records)
  • A recommendation for how much should be added to the reserve fund to meet future costs of repairing and replacing the corporation’s real/personal property, common property and managed property
  • How the current amount in the reserve fund and recommended amount to add to the reserve fund is determined
  • Any other relevant matters (for example, determining the potential damage to an item if it is not repaired or replaced)

After receiving the reserve fund report, a condominium board must approve a reserve fund plan describing how much money is needed to top up and maintain the reserve fund based on the report. The plan will also set out how the condominium board plans to raise any extra funds  to meet the report’s recommendations. For example, through a special levy and/or increased condominium contributions.

If you’re a unit owner, you must be given a copy of the reserve fund plan before the board can begin collecting any extra money to top up the reserve fund.

For resale units, potential purchasers should make a written request for a copy of the reserve fund report and plan from the condominium corporation before you buy.

Look for the following information in the report and plan:

• Who conducted the reserve fund study and prepared the reserve fund report? You may want to do some research to assess the qualifications of the provider.
• How much is currently in the reserve fund?
• What needs repair or replacement over the next 30 years or a time period longer than 30 years?
• Is there enough money in the reserve fund to cover the repair and replacement of the corporation’s real/personal property, common property and managed property?
• Will the condominium have to collect more money from owners?
• If there is a shortfall, how does the condominium board plan to make it up? Special levies? Increased condominium contributions (fees)?

Tips for buyers:

• When reviewing the reserve fund report and plan, you want to see a healthy reserve fund that will enable the corporation to adequately cover repair and replacement costs. The reserve fund plan should reflect the recommendations made in the report and include a realistic plan to cover long-term costs.
• You should also review other related documents such as meeting minutes, annual reports, and financial statements to see if and how the corporation has dealt with any prior reserve fund issues.  For example, do the documents reveal that the corporation has a history of imposing special levies to deal with reserve fund shortfalls?
• You should have a lawyer, real estate professional, and/or document review service review the reserve fund report and plan.

A conversion condominium development usually consists of units and common areas in an existing structure. The structure may have been used as rental accommodation or commercial leased space with some degree of renovation as part of the conversion process.

With conversion condominiums, the developer must complete a reserve fund study, report, and plan before offering units for sale. The developer must give you a copy of the reserve fund report and plan.

Review the reserve fund report. Consider what work is already complete by the developer, as well as future work. The report also explains what needs repairs or replacement over the next 30 years (or a time period longer than 30 years) and how much it will cost.

Since conversions often involve older and/or non-residential buildings, the future costs of repairs and replacements of the corporation’s real/personal property, common property and managed property could happen sooner and cost more than a new development. There is no requirement for a developer to put money into the reserve fund. Consequently, owners may pay higher contributions (fees) or special levies so that the reserve fund has enough money to cover future repairs.

You should have a lawyer, real estate professional, and/or document review service review the reserve fund report and plan.

When purchasing a unit in a new development, there likely will not be any reserve fund information available for you to review. A condominium corporation has 2 years from the registration date of the condominium plan to complete a reserve fund study, report, and plan.

For a complete overview of what you need to know about condo finances before you buy, download our free publication: Before You Buy: Understanding Condo Finances.

Within 30 days of registering a condominium plan, a developer must appoint an interim board. The Land Titles Office files the names and addresses of interim board members. An interim board holds office until the election of the first board. Interim board members must follow standards of conduct in running the condominium corporation, including:

• Act honestly and in good faith with the best interests of the corporation
• Exercise care, diligence and skill that a reasonable person in similar circumstances would do
• Avoid conflict of interest
• Make reasonable efforts to pursue remedies or claims under warranties or insurance policies in connection with the corporation’s property

A developer or interim board arranging a reserve fund study before a first board is elected must use an independent reserve fund study provider (a provider who is at “arm’s length”).

The developer has 90 days from the issuance date of the certificates of title to units (representing 25% of unit factors –so, once 25% of the units are sold) to hold a meeting of the owners to to elect an owner to the interim board. Owners can hold the meeting if the developer does not do so within this time period.

The elected interim board member does not have the power to vote on anything before the interim board. If the elected interim board member stops being on the interim board, then the developer has 30 days to convene another meeting of the owners to elect a new interim board member.

When registering a condominium plan, the developer has 90 days from the issuance date of the certificates of title to units (representing 50% of unit factors –so, once 50% of the units are sold) to hold a meeting to elect the first board. This meeting is also known as a “turnover meeting”). An owner can hold the meeting if the developer does not do so within this time period.

At the meeting to elect first board, there are a number of documents that the developer and interim board must provide at no charge to the corporation such as:

• Warranties and guarantees on the corporation’s property
• Structural and electrical working drawings and specifications
• Agreements to which the corporation is a party
• Certificates, approvals and permits
• Building assessment report or converted property study (for conversions)
• Any reserve fund report
• Any technical analysis of the units, real and personal property of the corporation or common property (where a converted property study is not required)
• Resolutions
• Minutes
• Other interim board records and documents

Once the first board is elected, the developer or interim board must also provide additional information and documents to the elected board such as:

• Copies of documents or orders as required under other legislation (e.g., Safety Codes Act, New Home Buyer Protection Act)
• Copies of technical documents regarding the condo corporation’s property (e.g., manuals, records of service/repair)
• Copy of the condo plan and redivision plan
• List of interim board members
• Information on owners, mortgagees and tenants
• Copy of any rules made by the board
• Copy of an unsatisfied court judgment or proceedings where the corporation is a party
• Copy of legal or other professional advice
• Copies of any proposed budget, financial statements or tax records
• Copies of records relating to the corporation’s financial institution account holding its funds (e.g., reserve fund and operating funds)
• Copies of legal instruments relating to the corporation’s property (e.g., exclusive possession lease, restrictive covenants, caveats registered against units)
• Copy of the corporation’s insurance policies and certificates
• Copy of any standard insurable unit description (if the first board is elected on or after January 1, 2020)
• A converted property study or building assessment report (for conversion units)

  See section 16.1(1) of the Condominium Property Act and section 20.2(1) of the Condominium Property Regulation for a detailed list of information and documents that a developer or interim board must provide at a meeting to elect first board and to the first elected board.

The condo corporation has a general duty under the Condominium Property Act (CPA) to repair and maintain its real, personal, common and managed property. Common property is anything in a condominium complex not within the boundaries of a condominium unit. Common property is  jointly owned by all owners. Managed property is any unit or part of a unit that a corporation must maintain, repair or replace under the bylaws.

As part of its general duty to repair and maintain, the condo corporation must also follow repair notices or orders made by municipal or public authorities.

Tips for condo boards:

• Check the bylaws for additional duties of the corporation to maintain and repair property.
• Unless the bylaws say otherwise, the condo corporation is generally not responsible for repairs within condominium units. Owners are responsible for repairing and maintaining anything within their condominium unit such as the fridge or dishwasher.
• Experts recommend having a list of competent, reputable contractors or supplier network at hand to help facilitate condo repairs.
• If there is an issue over the responsibility for repairs or with contractors, a board should consult with a lawyer for advice.

The condo corporation has an ongoing duty for future maintenance and replacement of depreciating property through a reserve fund. Under the CPA, a condo corporation must create and maintain a reserve fund. The fund must have enough money to cover major repairs and replacement of things like:

• the roof
• central heating
• electrical system
• doors and
• exterior siding

As part of the condo corporation’s duty to create and maintain a reserve fund, it must retain a reserve fund study provider to carry out a study of the property. The provider will then produce a reserve fund report with recommendations to the board. The condo corporation must then create a reserve fund plan based on the report. The report can determine the amounts needed through condominium contributions, special levies, or other method to finance and maintain the reserve fund.

The reserve fund plan should reflect the recommendations in the reserve fund report. Otherwise, there can be potential problems including:

• Large increases in condominium contributions or major special levies
• Financial stress to unit owners and
• Loss of value in units, which may make the units difficult to sell.

Condominium corporations must make repairs to a unit (including fixtures and finishing) that are within their responsibility to insure.

Condominium corporations must repair a unit according to its standard insurable unit description except in certain circumstances, for example:

•  the owner has insured improvements or is willing to pay for improvements to the unit as an out-of-pocket expense
• the owner is willing to pay the costs of repairing:
  • absent
  • destroyed or
  • partially damaged property (where at least one of the items is described as fixtures and finishing)
• the fixtures and finishing in the unit were installed below the standard insurable unit description

Condominium corporations can make unit owners responsible for repairs, or arranging for and supervising unit repairs under the bylaws.

In certain situations, a condominium corporation can make repairs to a unit and then bill the owner for them. For example, a condominium corporation can make, arrange for and supervise repairs when:

• the owner fails to make repairs, putting public safety, the common property, other units, occupants, personal property in common property or other units at risk
• the unit owner or owner’s agent has not started repairs within a reasonable amount of time and
• the corporation has provided reasonable notice to the owner

In such a situation, the owner is liable for paying the corporation for the prudent costs of the corporation’s actions in making, arranging for and supervising repairs.

Corporations can recover an insurance deductible up to $50,000 from an owner if damage originated in the owner’s unit. To learn more about insurance and deductibles, go to the Insurance section of this website.

Condominium corporations set condo contributions (fees) to help pay for repairs and maintenance. These contributions go towards the corporation’s operating account (which covers the control, management and administrative expenses for the corporation’s real and personal property, as well as common property and managed property) and to the reserve fund. Contributions are calculated based on unit factors unless the Condominium Property Regulation or bylaws say otherwise.

The board also has the power to levy a special levy in certain situations. For example, when the operating account cannot cover unexpected shortfalls. Or to increase the reserve fund balance to meet reserve fund plan requirements. Each owner’s payment of a special levy is calculated based on their unit factor unless the Condominium Property Regulation or bylaws say otherwise.

The cost of some repairs may be covered by the condo corporation’s insurance policy. Condominium corporations should check their insurance policy carefully to see whether their coverage extends to repairs (if any).

If a condominium corporation’s bylaws allow for it, condominium boards can levy chargebacks against owners. Chargebacks are costs that a condo board can levy against an owner when the owner, someone living in their unit (an occupant), or someone they are responsible for, causes the condo corporation to incur costs.

If the corporation has to fix, replace, maintain, or protect any unit, the corporation’s real or personal property or common property because of that person’s actions—or because they failed to act (an omission)—the condominium board can charge the owner back for those costs. The amount of the chargeback may include the actual costs and any reasonable related service costs the corporation incurs to do this work.

The amount levied must be the lesser of:

• the amount of the actual costs and reasonable related service costs and
• the deductible limit of the corporation’s insurance policy

Chargeback Notice
Before levying a chargeback, a condominium board must serve notice of the proposed chargeback on the owner. They must do so within 90 days after they become aware, or should have become aware, of an act or omission, that lead to the corporation incurring costs. The notice must have the following information:

• owner’s name and unit number
• date of and description of the act or omission
• estimated amount of the chargeback
• deadline for the owner to respond in writing. This deadline must be 10 days or more, excluding holidays, after service of the notification.

After the board gets a written response or when the deadline for the written response has expired (whichever is earliest), the board may decide to levy a chargeback on the owner by resolution. Or, they may decide not to levy a chargeback.

Disputing a chargeback
Owners can dispute a chargeback levied against them by making an appeal to court (the Court of King’s Bench). They must make the appeal within 30 days of the service of the chargeback statement.

• Act honestly and in good faith.
• Exercise care, diligence and skill that a reasonable person would exercise in similar circumstances.
• Avoid conflict of interest by disclosing any conflict of interest to the board and not voting on any such matters.
• Abide by the law, including theCPA, regulations and the bylaws.
• Act fairly and consider the interests of others.

• Perform the powers and duties of the condominium corporation subject to the CPA and any bylaw restrictions.
• Enforce the condominium’s bylaws, and review and update the bylaws, as needed, by special resolution.

• Set and collect owners’ condominium contributions (fees).
• Prepare financial documents such as an annual budget, financial statements, and annual report and provide copies to all owners within the appropriate timeframe.
• Administer the reserve fund, complete a reserve fund study, report and reserve fund plan.
• Determine if a special assessment will be imposed on condominium owners.

• Manage and maintain the condominium’s real, personal, common and managed property, including hiring and supervising a property management company, if applicable.
• Keep the condominium’s property in good and serviceable repair.
• Comply with notices or orders by any municipal or public authority requiring repairs to the property.

• Have property insurance and liability insurance for the condo corporation and board members.
• Respond to written requests for documentation from owners, purchasers, or mortgagees, as per the Condominium Property Act (CPA).

• Follow the general procedure for holding meetings, as well as more specific procedures on board elections, voting and resolutions.
• Hold an annual general meeting (AGM) every year and within 15 months of the previous AGM.
• Hold special general meetings if necessary.