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A Reserve Fund is an account intended to meet unexpected future costs, as well as provide for future upkeep expenses. In most cases, a Reserve Fund is a savings account, or it can be a highly liquid asset, available quickly and without restrictions should an unexpected expense arise. If the fund is set up to meet scheduled upgrade costs, it is feasible to use assets that are less liquid. In the case of condominiums unit owners pay a set monthly amount that is deposited into the reserve fund account to maintain condominium quality.
Establishing and maintaining a reserve fund is compulsory under Section 93 of the Condominium Act, 1998. The fund, its earned interest, and reserve fund operations statements are subject to annual audit reviews (where the condominium units exceed 24). A minimum balance of 10% of the operating budget must be maintained, and the condominium owner contributions must comply with an implementation plan that ensures 10 year's worth of adequate coverage regarding upkeep and forecasted future major repairs and replacements.
The funds are not designed for emergencies; it is illegal to use reserve funds for any expense other than major repair and replacement of common elements and assets. Reserve funds cannot be used to cover operating deficits, or as collateral for a loan for non-reserve fund purposes.
"The condominium reserve is a trust fund and must be invested in accordance with the parameters of Section 115 of the Condominium Act, 1998 and the applicable by-laws of the condominium. The funds may then be invested directly by the condominium corporation, or on its behalf by a member of the Canadian Investment Dealers Association provided they are insured by the Canadian Investor Protection Fund. The investments are limited to “eligible securities” as defined in subsection 115(5) of the new Act. " 1
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Kleinfeldt's reserve fund experts walk you through:
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- Life expectancies of equipment/structures, with accompanying major repair and replacement cost estimates
- Owner contribution calculations, to ensure future fund balance never drops below zeroowner contribution calculations, to ensure future fund balance never drops below zero
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Kleinfeldt's qualified and experienced workforce includes Reserve Fund specialists in all necessary disciplines: including engineers, architects, quantity surveyors, appraisers and Certified Reserve Planners, in compliance to Form 15 of the new Act, which sets out in Regulation 48/01 the specific and detailed information that must be included in every reserve fund study.
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1 - Deacon, Spears, Fedson & Montizambert, 2001, all rights reserved.
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