Can a Condo Use Reserve Fund Money for Daily Expenses in Ontario?

You may have noticed the reserve fund balance dropping, or heard that the board moved money to cover a bad year. If you suspect it is dipping into the reserve fund for everyday bills, you are right to ask questions.

This article explains what the law allows, what a board can do instead when the operating budget runs short, and how you can look into your concerns. It is general information. A lawyer can assess your specific situation.

The short answer

Under the Condominium Act, 1998, a reserve fund must be used solely for major repair and replacement of the common elements and assets of the corporation. No part of it may be used except for that purpose, so paying routine operating costs from it is not permitted.

In plain terms, the reserve fund is for big, predictable replacements such as a roof or elevator. It is not there to cover things like routine operating bills when money runs tight.

What counts as a reserve fund expense

Some expenses are clearly operating costs and some are clearly major replacements, but there is a grey area in between. The CAO says boards should check the component inventory in the reserve fund study and get professional advice before deciding whether an expense can be paid from the reserve fund.

The study lists components that will need major repair or replacement within at least 30 years and cost at least $500 to replace. That list is a useful reference point when you ask whether a particular spending item belongs to the fund.

What a board can do when the budget falls short

If the operating budget falls short, the CAO says a corporation may levy a one-time special assessment to cover shortfalls in its yearly budget, and the board can do this without owners' permission. A shortfall might come from an unforeseen repair or a lost court case.

Special assessments are shared by owners in the same percentages used for common expenses, and owners must pay their portion. That is unpopular, but it is the route described for shortfalls. Taking money from the reserve fund is not described as an option.

How to look into your concern

Start with facts rather than assumptions. A falling balance may simply reflect a legitimate major repair. Useful things to check:

• What was the money spent on, and is it a major repair or replacement of a common element or asset?
• Is the item listed in the study's component inventory?
• Did the board get professional advice before using the fund?
• Is the fund balance in line with the reserve fund study and funding plan?
• What does the reserve fund statement in a recent status certificate show?

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.

Which forum or remedy fits a complaint about misuse of reserve money depends on the facts and the building's documents. A lawyer can confirm that for you.

What to do next

• Write to the board or manager asking what the money was used for.
• Request the latest reserve fund study and financial statements.
• Ask whether the board relied on professional advice for the decision.
• Keep copies of everything and keep paying your fees on time.
• Speak to a lawyer if the answers are unclear or the amounts are significant.

Stay factual and calm in your requests. Boards are made up of neighbours, and a clear written question often gets a clearer answer than a confrontation.

Frequently asked questions