What is a reserve fund?
A condo’s reserve fund is a mandatory bank account used to pay for major repairs and replacements of common elements and assets. The CAO Guide on Condo Reserve Funds provides more helpful details.
How much money should be in the reserve fund?
Each condo corporation must contribute an amount that is reasonably expected to cover future major repairs and replacements of its common elements and assets. This amount is decided through a formal reserve fund study and a funding plan.
A large or small reserve fund amount is not the only indication of a condo’s financial health. What’s most important is whether the corporation has enough money to pay for major projects when they’re due.
Who is qualified to prepare a reserve fund study?
A reserve fund study must be prepared by a qualified reserve fund study provider, such as:
- Licensed architects
- Engineers
- Quantity surveyors
- Appraisers
- Certified technologists and technicians
- Members of the Real Estate Institute of Canada with the certified reserve planner designation
Review our Reserve Fund Guide to learn more.
What is a major repair or replacement?
Condo boards should check the component inventory in the corporation’s reserve fund study and seek professional advice before determining if an expense is covered by the reserve fund.
Class 1 and 2 reserve fund studies include a detailed component inventory list of all common elements and assets of the corporation.
What are the different types of reserve studies?
There are three types of reserve fund studies:
- Class 1 – Comprehensive study
- Class 2 – Updated study with a site inspection
- Class 3 – Updated study without a site inspection
Class 1 and 3 studies include both a physical inspection and a financial analysis, while Class 2 studies only include a financial analysis. The CAO’s Guide on Condo Reserve Funds has more in-depth information.
How often do reserve fund studies need to happen?
Condo corporations must conduct periodic studies to determine if their reserve fund is adequate.
- Class 1 study: Required within the first year after the condo’s registration of its declaration and description.
- Class 2 and Class 3 studies: Required on an alternating basis at least every three years, after the first class 1 study is completed