How Does an Ontario Condo Reserve Fund Work and Why Does It Matter When Buying?

A reserve fund is an account a condo corporation keeps only for major repairs and replacements. It matters when you buy because condo fees include reserve fund contributions, so the health of the fund affects what owners pay over time.

The first reserve fund study, a Class 1 comprehensive study, is due within the first year after registration. After that, Class 3 and Class 2 updated studies alternate at least every three years. Within 120 days of receiving a study, the board must review it and propose a plan for adequate future funding. It must send owners notice within 15 days of proposing the plan, and the plan takes effect 30 days after it is sent to the auditor and owners.

Whether a fund is underfunded depends on the study's findings and the plan that follows. Reading the most recent study and the funding plan, if there is one, is a practical way to judge whether the fund looks healthy or whether higher fees or special assessments may follow. A lawyer can help you review them before you buy.