August 2024
Ridiculous as it sounds to those who live in Ontario, British Columbia has finally made reserve fund studies mandatory as of July 1, 2024.
That province now requires depreciation reports every five years for strata (condo) corporations, as compared to Ontario’s requirement that mandates reserve fund studies every three years with the intent of preventing budget shortfalls and unexpected costs.
Strata owners can no longer waive rules that otherwise require them to obtain a depreciation report. Prior to this date, the requirement to obtain a depreciation report could be waived by an annual 75 percent vote of owners.
Reserve funds, or depreciation reports as they are called in BC, can and frequently are underfunded because of the latitude afforded the condo board in their preparation. Construction or renovation costs are often greater than estimated in these reports, and there is considerable flexibility in deciding which reserve fund items actually get undertaken and when. The result is that far too many condominium corporations require special assessments to rectify the problems and costs created by these failures.
Some Ontario condominium corporations choose to have their reserve fund studies updated annually. This gives them a better understanding of actual vs. expected spend, and allows them to better understand their current and future financial situation.
Jon Juffs of Egis Canada prepares reserve fund studies in both Ontario and British Columbia and explains differences between the two provinces. “One difference between Ontario and BC condominium laws is that BC strata corporations can’t use their reserve fund to pay for expenditures unless they are recommended in a depreciation report except for certain stated exceptions such as expenditures relating to electric vehicle charging infrastructure and safety. All other expenditures require approval of 75 percent of strata owners.” This is a stronger protection than in Ontario which, in contrast, allows condominium boards to spend reserve fund amounts on anything considered to be a “major repair or replacement”.
For too many years, strata owners in BC have suffered and paid the cost of failing to require a reserve fund study. Ontario, despite requiring a more practical approach, allows too much flexibility in how the fund can be used which leads to its misuse. Neither province has found a way to require condo/strata boards to contribute sufficient funds to ensure that special assessments are unnecessary.
A blending of both Ontario and BC approaches, combined with establishing adequate minimum contributions, could lead to stronger reserve funds for stratas and condominium corporations.
