Condo Reserve Fund Study in Ontario: What Owners Should Check

If you own a condo or are thinking of buying one, you may have been handed a reserve fund study. It is often a thick report full of tables, and it is easy to set aside. Yet it is one of the best windows into whether your building is saving enough for big repairs.

This article explains what the study is, how often it must be done, who can prepare it and what to look for. It is general information, not advice on your building. If the numbers worry you, a lawyer or another qualified professional can look at your specific documents.

What a reserve fund and its study are

A condo reserve fund is a mandatory account used for major repairs and replacements of common elements and assets. Think of roofs, elevators, parking garage membranes and similar large items. The reserve fund study is the report that estimates what those items will cost and how much the corporation should set aside to pay for them.

The study matters because the amount the corporation contributes to the fund is set by a reserve fund study and a funding plan. A weak or outdated study can mean the fund is too small when the big bills arrive.

How often a study must be done

The first study, called a Class 1 study, is required within the first year after the declaration and description are registered. After that, Class 2 and Class 3 updates alternate at least every three years.

When you read a study, check its date and which class it is, so you know how recent the information is and whether anyone actually inspected the property for that version.

Who can prepare the study

A reserve fund study must be done by a qualified provider. The qualified providers are:

• A licensed architect or engineer
• A quantity surveyor or appraiser
• A certified technologist or technician
• A Real Estate Institute of Canada member with the certified reserve planner designation

If the cover page does not make clear who prepared the study and in what capacity, ask the board or property manager.

How to read the study

The physical analysis lists components that will need major repair or replacement within at least 30 years and cost at least $500 to replace. For each, it records the year of acquisition, remaining life and estimated replacement cost. The financial analysis states the fund's financial position on the study date and recommends a funding plan covering at least 30 consecutive years.

• Is the study date recent, and is it the right class for its timing?
• Do the listed components match what you see in the building?
• Are large items, such as the roof or elevators, listed with a remaining life and a cost?
• What was the fund balance on the study date, and what contributions does the plan recommend?
• Does the board's plan follow the study, or does it depart from it?

You do not need to understand every table. Focus on the fund balance, the recommended contributions and whether the board is following them.

What the board must do after it receives the study

The board must review the study within 120 days of receiving it and propose a plan for adequate future funding. Within 15 days of proposing the plan, it must send owners a notice of future funding in the prescribed form. The notice must contain a summary of the study, a summary of the proposed plan and a statement of any areas where the plan differs from the study.

The board must also send the auditor a copy of the study, the proposed plan and the notice sent to owners. The plan is implemented 30 days after it is sent to owners and the auditor. The notice is often the easiest place to start reading, since it summarizes the study in shorter form.

What to do next

If you own, ask for the latest study and the most recent notice of future funding if you have not received them. If you are buying, a status certificate shows the budget, a statement on the reserve fund and any legal issues. The corporation can charge up to $100 including taxes and must deliver it within 10 days of receiving the request and payment.

• Note the study date and class.
• Compare the notice of future funding with the study.
• Look for any areas where the plan differs from the study.
• Have a lawyer review the documents if you are about to buy or if the numbers look off.

Frequently asked questions