What Is a Contingency Reserve Fund in a British Columbia Strata?

If you are buying or already own a strata lot in British Columbia, you will see the words contingency reserve fund, or CRF, in budgets, minutes and the Information Certificate (Form B). It is the strata's savings for large, less frequent costs, and its size can affect what you pay later.

This article explains how the CRF is funded, how much must go into it, what it can be spent on, and what a thin balance can mean for your future costs. Every strata is a little different, so use this as a map for your own documents.

This article covers the law of British Columbia.

What the CRF is and how it differs from the operating fund

The Strata Property Act, section 92, requires a strata to keep two funds. The operating fund pays common expenses that occur once a year or more often, including obtaining a depreciation report or an electrical planning report. The CRF pays for expenses that occur less often than once a year or that do not usually occur. Both are funded by strata fees.

Think of the operating fund as the day-to-day account and the CRF as the long-term repair savings. The CRF must be accounted for separately and invested only in insured accounts at BC savings institutions or in investments permitted by Strata Property Regulation s. 6.11, and the interest stays in the fund.

How much must go into it

Under Strata Property Regulation s. 6.1(2), the annual CRF contribution must be at least 10% of the total amount budgeted for the operating fund contribution. The Province describes this as applying to budgets since November 1, 2023.

New stratas have a different rule. Owner developers must contribute to the CRF the lesser of 10% of estimated operating expenses multiplied by the years since the strata plan was deposited, or 50% of estimated operating expenses.

CRF contributions are not refundable when you sell your lot. You leave the money in the fund for the next owner.

What CRF money can be spent on

Under section 96, CRF money can be spent only on expenditures consistent with the fund's purpose and approved by a 3/4 vote at an annual or special general meeting. Some listed items need only a majority vote, such as a depreciation report, an electrical planning report and certain EV charging costs. Emergency spending under section 98 is also allowed.

For emergency spending, owners must be told as soon as possible, except where the spending is for a deductible. The CRF may also lend to the operating fund, but only for temporary shortfalls, and the loan must be repaid by fiscal year-end.

What a low balance can mean

A small CRF does not by itself mean something is wrong, but it can mean big repairs will be paid another way. One common way is a special levy, which generally needs a 3/4 vote when shares follow the strata-fee method. Another is a fee increase, which can be one of the options a depreciation report models.

A depreciation report must include a 30-year CRF cost projection, at least three 30-year cash-flow funding models, and the CRF balance net of approved unspent expenditures. The strata does not have to adopt any of the models. Depreciation reports are required every five years for stratas with five or more lots. Stratas with fewer than five lots do not need one.

Whether a particular balance is healthy depends on the age, size and condition of the building. That is a question for you, your agent and, if needed, a lawyer or other professional to look at with the documents in hand.

What to do next

If you are buying, ask for the Form B and read the CRF section carefully. The Province lists the CRF balance net of approved unspent expenditures, approved special levies and expected budget overruns among the items buyers should review. The most recent depreciation report must be attached to the Form B.

• Request the Form B and note the CRF balance and any approved special levies.
• Read the attached depreciation report and its funding models.
• Compare the budgeted CRF contribution with the 10% minimum.
• Read recent minutes for votes on CRF spending or planned repairs.
• If the strata has sections, ask for a Form B from both the strata corporation and the section.
• Talk to a lawyer if the numbers or minutes raise questions.

Frequently asked questions