Reserve Funds – The Limits of a 30-year Study
According to the Condominium Act, 1998, all condominium corporations (in Ontario) must make contributions to a reserve fund for purposes of “major repairs and replacements”. To assist in determining the required contributions, condominium corporations must arrange for “reserve fund studies”, which are carried out by prescribed reserve fund analysts. The reserve fund study must plan for all major repairs and replacements over at least a 30-year period.
The problem with this is as follows: What if there are common element features, or assets, that won’t require repair or replacement until after the 30-year study period?
Depending upon the methodology of the reserve fund analyst, those features may not be included in the 30-year study, and accordingly may not be included in the analysis of the required funding contributions for a given study.
As a result:
- It is important to understand the methodology used by your reserve fund analyst to arrive at the required funding contributions for your particular study.
- Some reserve fund analysts, and some condominium corporations, may prefer a longer study period (say, 40 years or more) for their reserve fund studies.
- In any event, condominium corporations may need to include a warning, in paragraph 12 of their status certificates, if there are common element features, or assets, that won’t require repair or replacement until after the period covered by the corporation’s reserve fund study (whether the period is 30 years, 40 years, or more), and which have not otherwise been included as part of the analysis for the required funding contributions. This is because contributions to the reserve fund might need to increase (beyond inflation) when those repairs or replacements do ultimately fall within the study.