Contingency Reserve Fund in British Columbia Stratas: How It Works

If you own or are thinking of buying a strata lot in British Columbia, you will see a line for the contingency reserve fund, usually called the CRF. It is the strata's savings for large or irregular costs, and it affects both your monthly fees and your risk of a future special levy.

This article explains what the CRF is, how much the strata must put into it, what it can be spent on, and where to look when you want to know whether the balance looks healthy.

This article covers the law of British Columbia.

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

The Strata Property Act requires a strata corporation 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.

In everyday terms, the operating fund is the day-to-day budget for things like cleaning and utilities. The CRF is the reserve for big, infrequent jobs such as replacing major building components.

The CRF must be accounted for separately. It can be invested only in insured accounts at BC savings institutions or in investments permitted by Regulation s. 6.11, and the interest stays in the fund.

How much the strata must contribute

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. This applies to budgets since November 1, 2023.

New stratas have a special rule. The owner developer 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. The money stays with the strata.

What the CRF can be spent on

CRF money may be spent only on expenditures consistent with the fund's purpose and approved by a 3/4 vote at an AGM or SGM. The exceptions are listed items that need only a majority vote, such as a depreciation report, an electrical planning report and certain EV charging costs, and emergency spending authorized under s. 98.

• Emergencies: council may spend CRF money without an owner vote only where needed to ensure safety or prevent significant loss or damage, limited to what that requires. Owners must be told as soon as possible.
• Insurance deductibles: council may use the CRF to pay an insurance deductible for required repairs, and owners need not be told in advance. Paying a deductible from the CRF or a special levy does not need a 3/4 vote.
• Insurance premiums: for unanticipated increases, council may spend from the operating fund or CRF without an owner vote, but only the minimum needed to pay the premium.
• Loans: the CRF may lend to the operating fund only for temporary shortfalls, repaid by fiscal year-end.

What a low balance can mean for special levies

A CRF that is small compared with the building's likely repair costs means the strata may need other money when a big expense arrives. One common route is a special levy, though the right answer depends on the strata, its building and its plans. A large balance is not automatically a good sign either, because it has to be weighed against what is coming.

A special levy whose shares are calculated by the strata-fee method generally needs a 3/4 vote at an AGM or SGM, and the resolution must state the purpose, the total amount, the method of calculating each lot's share, each lot's amount and the due date or dates. There is an exception: if a levy for a common property repair needed for safety or to prevent significant loss or damage gets majority support but less than 3/4, the strata may apply to the BC Supreme Court for an order approving it. Either way, a vote can be a hard conversation if the money is needed urgently.

A depreciation report is a useful planning tool. It must contain a 30-year CRF cost projection and at least three 30-year cash-flow funding models, which can use the CRF, special levies, fee increases, borrowing or a combination. The strata does not have to adopt any of them. Depreciation reports are required every five years for stratas with five or more lots, and stratas with fewer than 5 lots are not required to have one.

What to do next

If you are buying, ask for the numbers before you remove conditions. A buyer with an agreement to buy a strata lot that is not yet conveyed can request a Form B, even in the subject-removal period. The strata must give it within one week of the request.

• Read the CRF balance on the Form B, along with approved future special levies and expected budget overruns.
• Check that the balance is stated net of approved unspent expenditures.
• Read the attached current budget and the most recent depreciation report.
• Expect a fee of up to $35 plus photocopying, and know the strata may refuse to issue the certificate until it is paid.
• If the strata has sections, request a Form B from both the strata corporation and the section.
• Ask a lawyer or accountant to help you read the figures if they are unclear.

Frequently asked questions