Use of Reserve Fund Monies
Section 93(2) of the Condominium Act, 1998 states that a condominium corporation’s reserve fund can only be used for the purpose of major repair and replacement of the common elements and assets of the corporation. In light of this wording, we are often asked whether this means that only the strict repair costs (for example, the costs of contractors and engineers) can be funded from the reserve fund. We are also asked whether this means that only repairs and replacements that are listed in the reserve fund study can be funded by the reserve fund.
In our view, the wording of section 93(2) allows for the use of reserve fund monies for all costs related to major repairs and replacements. Such costs may include a variety of soft costs, which are incurred for the purpose of proceeding with a major repair and replacement.
In addition, reserve fund monies are not restricted to funding only those major repairs or replacements which are listed in the reserve fund study. In appropriate circumstances, reserve fund monies can properly be used to fund unexpected or unplanned expenses.
One note of caution: for any unplanned expenditure (not predicted by the reserve fund plan), remember to consider whether or not the unexpected depletion of the reserve fund could result in an increase in reserve fund contributions in the future (which might need to be disclosed in paragraph 12 of the status certificates).