November 2020
British Columbia is looking to raid reserve funds as a partial solution to paying insurance rates that have risen an average of 50 percent over the past year. This isn’t the first time a province has attempted to raid reserve funds. It wasn’t long ago that Ontario allowed condominium corporations to pay for installation of electric vehicle charging systems through the reserve fund.
The concept of a reserve fund is simple. A study is undertaken to determine when, for what specific purposes and how much money is needed to maintain a community’s infrastructure. Owners pay into the fund to ensure money is available when needed.
When money is removed from the fund for unfunded purposes, there will not be enough left for all anticipated expenditures. Since money doesn’t grow on trees, the fund will be inadequate unless contributions are increased. In British Columbia, using reserve fund money to pay rising insurance premiums is no solution to what appears to be a long-term history of underfunding for building maintenance and repairs.
Using the reserve fund for expenditures without first having set aside the funds is not sustainable and inappropriate regardless of what government authorities may suggest. Governments should not be encouraging communities to deplete reserve funds to achieve non-reserve fund purposes.
