Condo Act Reform - #2 Financial Management: Reserve Funds and Reserve Fund Investments
Today I will be addressing reserve funds and reserve fund investments. Every condominium in Ontario must have a reserve fund to pay for major repairs and replacements of the common elements and assets of the condominium (see sections 93-95 of the Act and the regulations). The Act currently requires every board to engage a professional to conduct a reserve fund study, which must be updated every three years. There are three types of studies: comprehensive, with a site inspection, or without a site inspection. The second stage report includes, but is not limited to, the following recommendations for reserve funds and reserve fund studies:
- If the balance is less than 50% of the balance shown in the notice of future funding, the board must ask the person that conducted the last study if a new one is required before the three year period is up;
- A formula should be used to calculate the first year contribution to the reserve fund study, not simply the 10% contribution currently required;
- The reserve fund may be used for additions, alterations, or improvements required by law (i.e. physical changes to the building to accommodate those with disabilities) without unit owner approval; and,
- The reserve fund may be used for "green energy projects" without the approval of the owners as long as certain conditions are met.
- The list of permitted financial institutions where boards may deposit condominium funds should be expanded (i.e. insurance companies and financial institutions in other provinces); and,
- Two or more condominiums should be allowed to "pool" their funds together so they can obtain a greater rate of return.