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Legal & Regulatory Updates

Audrey Loeb, LSM LLB LLM
Senior Partner,
Shibley Righton LLP

Condo Board Obligations

Regarding Reserve Fund Contributions & Spending

Ensuring the Financial Health setting aside funds for future repairs and 2. Adequate Funding
and Longevity of Condominium replacements, the corporation can address Based on the reserve fund study, the
Corporations significant maintenance issues without board must ensure that contributions
The board of directors of a condo- imposing sudden special assessments or to the reserve fund are sufficient. This
minium corporation in Ontario have dramatically increasing monthly fees. This involves setting and adjusting the contri-
significant responsibilities, particularly proactive approach ensures that the prop- butions from unit owners in accordance
regarding reserve funds. The board of erty remains in good condition, thereby with the projections in the reserve fund
directors must collect and manage these preserving its value and appeal. study. These should be collected as part
funds prudently and in compliance with of the monthly condominium fees to
the Condominium Act. This article sets out Board of Directors’ accumulate enough funds to cover antic-
the obligations of the board of directors Responsibilities ipated major repairs and replacements
concerning reserve fund contributions Management of the Reserve Fund without resorting to special assessments.
and the spending of these funds to protect is one of the board of directors’ major 3. Segregation of Reserve Funds and
the integrity of the condominium. obligations. The following sets out their Investing
key obligations: The reserve fund must be main-
Understanding the Reserve Fund 1. Conducting Reserve Fund Studies tained in a separate account from the
The reserve fund is a crucial financial Under Section 94 of the Condominium condominium’s operating funds. This
component of a condominium corpo- Act, the board is required to have a reserve segregation is critical to ensuring that
ration. It can only be used for major fund study carried out at least every three reserve monies are only used for their
Photo: ©iStock.com/ Kenneth Cheung elevators, HVAC systems, and parking assesses the condition of the common ensuring the investment of reserve funds
repairs and replacements of the prop-
years. This study, conducted by a quali-
intended purposes. The board is respon-
erty’s common elements, such as roofing, fied reserve fund analyst or engineer,
sible for overseeing this segregation and
complies with the requirements set out
structures. The Condominium Act, 1998, elements and assets of the corporation and
in the Condominium Act.
mandates establishing and maintaining estimates the necessary future expendi-
4. Proper Spending
this fund to ensure the long-term viabil-
tures over 30 years. The study sets out the
The board is authorized to spend
ity of the property. An adequately funded projected dates for repair and replacement
Reserve account is the key to avoiding and informs the board about the required
reserve funds only on major repairs
unexpected and substantial financial contributions to maintain an adequate
and replacements. The approval of
burdens on unit owners. By regularly reserve fund balance.
owners is not required. This spending
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