NOTE: All references to Section numbers refer to sections in The Condominium Act (SM 2011, c. 30, Sch. A).
What is a reserve fund and what is its purpose?
A reserve fund is set up to provide enough money to pay for the condominium corporation’s responsibilities to maintain and repair the property (as required by the act and the condominium corporation’s declaration.)
Every condominium corporation must have a reserve fund, which the board of directors manages (as a common asset) on behalf of the unit owners.
Section 143(1) and (9)
What can the money in the reserve fund be spent on?
The reserve fund can be used to pay for repairs and replacements that may be needed over time but would not normally be done every year. Some examples are major repairs to, or replacement of:
How much money needs to be kept in the reserve fund?
There is no set amount a condominium corporation must keep in its reserve fund. However, when setting the total annual contribution to the reserve fund, the board, which has a duty to act with a view to the best interests of the condominium corporation, must consider the amount recommended in the most recent reserve fund study or update. (See below for details of reserve fund studies and updates.)
Section 94(2), 144(2), 145(1)
How does the condominium corporation calculate the total annual contribution?
Each financial year, a condominium corporation must decide the total contribution to be made to the reserve fund, and
Who contributes to the reserve fund?
Unit owners must contribute the amount set out by the condominium corporation.
A declarant who owns one or more units must contribute to the reserve fund, for each unit, in the same way other unit owners are required to contribute.
Even if unit owners give up their right to use all, or part of, the common elements (or if the corporation’s declaration, by-laws or rules restrict unit owners from using all or part of the common elements), they will still be required to contribute to the reserve fund.
Section 145(1), 145(2), 146
What happens if a unit owner does not contribute to the reserve fund?
If a unit owner fails to contribute, the condominium corporation may file a lien against the unit and its share of the common elements. The lien may include the unpaid amount, any interest owing, and the legal costs of trying to collect the unpaid amount. The condominium corporation must file the lien with the district registrar at the Land Titles Office within three months after the unit owner’s failure to pay.
Can the money in the reserve fund be used for other purposes?
Usually, the reserve fund may be used only for the purpose it was established. However, if the most recent reserve fund study shows there is more money in the fund than is required to pay for allowable reserve fund items, then the reserve fund may be used for other purposes, but only with the written consent of all the unit owners.
Section 143(3), 143(4)
Can contributions to the reserve fund be refunded or distributed?
No. As a general rule, no part of the reserve fund can be refunded to a unit owner or distributed to a unit mortgagee, even when the unit owner sells the unit.
There are only two exceptions. The reserve fund, along with other common assets, can be distributed to the unit owners:
Section 143(7), 143(8), 143(9), 270, 284
Can the money in a reserve fund account be invested?
Yes, but only in one or more of the following:
Any interest or income earned on the money in the reserve fund becomes part of the fund.
Condominium Regulation, section 30
Does the board of directors need consent from unit owners to make payments out of the reserve fund?
No. Their consent is not required as long as the reserve fund is used for the purpose it was established - for major repairs and replacements.
Reserve Fund Study
What is the purpose of a reserve fund study?
It is to determine the amount of money required for the reserve fund, based on the estimated cost of major repairs to or replacement of the common elements, and the expected life span of the common elements.
Does every condominium corporation have to ensure that a reserve fund study is completed?
Yes. To find out when this must be completed, condominium corporations can refer to section 29 of the regulation. The table below gives a brief outline.
Note: Requirements for reserve fund studies on the sale of a unit created or to be created on a condominium conversion or on the delayed sale of a unit, are found below the table
Date condominium corporation created
When Reserve Fund Study must be completed
When an update to a reserve fund study must be completed
On or after February 1, 2015 (the date the act came into force)
Within three years after the day the declaration and plan are registered
By the end of the fifth year covered by the study or latest update
Before February 1, 2015
By January 31, 2018 (that is, within three years of February 1, 2015), unless a study was completed within two years before February 1, 2015 and the board feels it substantially meets the requirements in sections 19-23 of the Condominium Regulation.
By the end of the fifth year covered by the study or latest update
Condominium Regulation section 29
Condominium conversions and delayed sales:
If condominium conversion occurs on the registration of a declaration:
The declarant must make sure a reserve fund study has been done and, if required, updated, before entering into the first agreement of purchase and sale for any unit created, or to be created, on the conversion.
If condominium conversion occurs on the registration of a phasing amendment:
The owner-developer of the phasing unit must make sure a reserve fund study has been done and, if required, updated, before entering into the first agreement of purchase and sale for any unit created, or to be created, on the conversion.
If, after a declaration is registered, all the condominium units are rented, leased or otherwise occupied instead of being sold:
The declarant or later owner of all the units must make sure a reserve fund study has been done and, if required, updated, before entering into an agreement of purchase and sale for any of the units (this requirement does not apply to the sale of all the units in the property to the same person).
In each of the cases above, the declarant, owner-developer, or any later owner of all the units has to make sure that a reserve fund study is updated by the end of the fifth year covered by the study or the latest update.
Condominium Regulation, section 29
What are the requirements of a reserve fund study?
The requirements are found in the Condominium Regulation. See sections 19 – 27.
Who may conduct a reserve fund study?
The Condominium Regulation covers who may or may not conduct a reserve fund study. See section 25.
Need more information?
For more information on reserve funds and reserve fund studies, see: