How Condo Reserve Funds and Reserve Fund Studies Work in Alberta

If you own a condo in Alberta, part of your monthly contribution likely goes into a reserve fund. It is the money meant to pay for big, predictable jobs such as roofs, parking structures or elevators, so owners are not hit with a large bill all at once.

This article explains what the fund is, how often the corporation must get a reserve fund study, who can do the study, and what can happen when the fund falls short.

This article covers the law of Alberta.

What a reserve fund is

The Condominium Property Act and the Condominium Property Regulation govern condominiums in Alberta. Under the Act, the corporation must establish and maintain a reserve fund reasonably sufficient to provide for major repairs and replacement of its property, common property and managed property.

The corporation must keep the reserve fund in a separate bank account, and owners must get an annual reserve fund report with the AGM package.

In plain terms, the reserve fund is a savings account for the building. A well-kept one spreads the cost of major work over many years and many owners, which is why buyers and current owners both pay attention to it.

How often a reserve fund study is required

The corporation must retain a reserve fund study provider to study the depreciating property, and the first study is due no later than 2 years after the condominium plan is registered. After that, the study must be repeated on or before 5 years from the day the most recent reserve fund plan was approved.

The study should consider a 30-year timeframe, and a corporation may do one sooner than required.

Who does the study and what happens next

The study must be done by a qualified individual. Directors, officers, employees, condominium managers, owners and occupants are excluded as providers, and developer or interim-board studies need an arm's-length provider.

After receiving the report, the board must approve a reserve fund plan setting the funding method and amounts, so sufficient funds are available through owners' contributions or another reasonable method. Owners must get a copy before funds are collected under it.

There is one exception. A corporation is exempt from the study where title to every unit is held by the same owner or group of owners and the units are rented to tenants who are not purchasers or intended purchasers.

What happens when the fund is underfunded

A fund that is not adequately maintained may force the board to levy special assessments. A special levy can be used to increase the reserve fund balance to meet the reserve fund plan.

The board may determine contributions, including a special levy, by resolution, and an owner vote at a general meeting is generally not needed. The exception is a special levy for a capital improvement, which requires a special resolution of the owners first.

As soon as possible after approving a special levy, the board must tell each owner its purpose, the total amount, how each unit's share was calculated, the owner's amount and the payment dates. Unused funds go to the reserve fund.

An owner who disagrees with a special levy can raise it with the board. Alberta.ca points to the resolving-condominium-disputes process, and the Court can remedy improper conduct, which includes oppressive or unfairly prejudicial conduct of the corporation's affairs.

Reserve fund money also has limits on how it is spent. It may not be used for capital improvements unless removal is authorized by special resolution, or is necessary for compliance, and sufficient funds remain. The rules do not set a single percentage target for the fund. The plan has to be reasonable in the circumstances, so what is adequate depends on the building.

What to do next

• Ask for the current reserve fund plan, the latest study and the annual reserve fund report.
• Note the date the most recent plan was approved and count forward to the next study.
• Check whether the plan's contributions match what the study recommended.
• Before buying, ask for the information statement, which covers reserve fund and contribution amounts.
• Talk to a lawyer if the fund looks seriously short or a large levy is proposed.

Requested documents include reserve fund plans, reports and annual reports. The corporation must provide them within 10 days of a written request.

The corporation can only charge fees that the regulation allows. The maximum fee for the information statement is $100. For other requested documents the cap is $10, or $0.25 per page where the document is in hard copy and exceeds 40 pages. A rush surcharge of up to $20 may be added for other documents produced within 3 days.

Frequently asked questions