What Is a Condo Reserve Fund in Alberta and Why It Matters

When you read condo documents, you will see reserve fund balances, studies and plans. They can look like accounting detail, but they say a lot about how ready the building is for big repairs such as roofs, elevators or windows.

This article explains what the fund is for, how it is built, who prepares the study and what a low balance can mean for you as an owner or buyer.

This article covers the law of Alberta.

What the reserve fund is and what it pays for

The Condominium Property Act requires the corporation to establish and maintain a reserve fund reasonably sufficient to provide for major repairs and replacement of its property, common property and managed property. In plain terms, it is the pool of money the corporation relies on for those large, infrequent repairs, so how well it is kept matters to every owner.

Reserve fund money may not be used for capital improvements unless removal is authorized by special resolution (or is necessary for compliance) and sufficient funds remain. It can pay for the required study and report.

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

How the fund is built: the study and the plan

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. The study must be repeated on or before 5 years from the day the most recent reserve fund plan was approved. Alberta.ca says it should consider a 30-year timeframe, and a corporation may do one sooner.

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.

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.

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 a low balance can mean

There is no single percentage that tells you a fund is healthy; the plan must be reasonable in the circumstances. A low balance is a prompt to ask questions, not an automatic verdict.

Alberta.ca says a fund that is not adequately maintained may force the board to levy special assessments. A special levy may fund unexpected and urgent repairs, operating shortfalls, increasing the reserve fund balance to meet the reserve fund plan, capital improvements, or satisfying a judgment against the corporation.

• The board may generally decide a special levy by resolution, without an owner vote.
• If the levy is for a capital improvement, a special resolution of the owners is required first.
• The board must tell each owner the purpose, total amount, how each unit's share was calculated, the owner's amount and the payment dates, and unused funds go to the reserve fund.

If you disagree with a levy or the fund's management

An owner who disagrees with a special levy can raise it with the board. Disputes about matters under the Act, regulations or bylaws can go to the Condominium Dispute Resolution Tribunal. Whether a particular levy dispute can be heard there is worth confirming with a lawyer. The Court can also remedy improper conduct, meaning non-compliance with the Act, regulations or bylaws, or oppressive or unfairly prejudicial conduct.

Once a Tribunal hearing has concluded, no Court action may start, and no Tribunal application can be filed if a Court action has begun on the same dispute. Choose your route with care.

What to do next

• Request the reserve fund plan, reports and annual reports in writing.
• Check when the last study was approved and whether the next one is due within 5 years.
• Look at the current balance, the planned contributions and any large repairs coming up.
• Read minutes for talk of special levies or deferred repairs.
• Ask a lawyer or accountant if the figures worry you, especially before you remove purchase conditions.

Frequently asked questions