finances-reserve-fund-study

Reserve Fund Studies
“Nearly a third of Canadians have one month or less in emergency savings:
survey”
—Globe and Mail headline 08 Sept 2014

If a third of all Canadians don't think that having sufficient savings is important for them and their families, why would they would believe that it is important for their condo corporation to save money for future repairs?

Many don't think that it is important to put some of their money aside for expensive future repairs when they:

•	consider their condo unit a short-stay starter home before they buy a house.
•	are short-term investors.
•	retirees who figure they will be dead before the roof falls in.
•	new buyers who put every nickel they had into their down payment.
•	owners who don't want to pay more now to benefit future buyers.
•	would rather spend their money on a night at Casino Rama.

The government recognized that this was a problem so they mandated that all condos must save a reasonable amount of funds to pay for future repairs when they would be needed.

Reserve Fund Studies
The Condo Act states that the condo corporation must have one or more reserve funds and that the contributions to the reserve fund shall be the amount that is reasonably expected to provide sufficient funds for the major repair and replacement of the common elements and assets of the corporation, calculated on the basis of the expected repair and replacement costs and the life expectancy of the common elements.

Use of reserve fund
The reserve funds shall be used only to pay for major repairs and replacements. The board does not require the consent of the owners to use the reserve funds on major repairs and replacements.

Reserve fund study
The corporation shall conduct periodic studies to determine whether the amount of money in the reserve fund and the amount of contributions collected by the corporation are adequate to provide for the expected costs of major repair and replacements of the common elements.

The study
The reserve funds and the updates to the study shall be done by qualified persons (engineers) who are independent of the board or the condo corporation.

The timing
Within 120 days of receiving a reserve fund study, the board shall review it and propose a plan for the future funding of the reserve fund that the board determines will ensure that the fund will be adequate for to pay for the work that will need to be done when it needs to be done.

Copy of plan
Within 15 days of proposing a plan, the board shall,

(a)	send to the owners a notice containing a summary of the study, a summary of the proposed plan and a statement indicating the areas, if any, in which the proposed plan differs from the study; and
(b)	send to the auditor a copy of the study, a copy of the proposed plan and a copy of the notice sent to the owners.

Implementation of proposed plan
The board shall implement the proposed plan 30 days after sending the copies to the owners and the auditor.

So within 4½ months of receiving the study from the engineers, the plan is being implemented.

So what could go wrong?
In one word: lots.

•	The board may not update the Reserve Fund Studies. A few condos have not updated their studies for ten years or more.
•	The board may sit on a new Reserve Fund Study and neglect to make a plan on how to implement it.
•	The Act states that the board's plan can differ from the study as long as the board explains the differences to the owners. The board may make big changes and then not inform the owners that there are differences.
•	The board may accept the study's recommendations on paper but ignore them in real life.