Every Ontario condominium corporation, including every loft condominium, must keep a reserve fund for major repair and replacement of the common elements and assets. Roofs, windows, masonry, elevators and garages are typical items.
Studies and funding plans
Under s.94 of the Condominium Act, 1998 the corporation must conduct periodic reserve fund studies to determine whether the fund and the contributions to it are adequate. O. Reg. 48/01 sets the timing: a new corporation does a comprehensive study within the year after registration, and studies then recur within three years of the last one, alternating between studies with and without a site inspection.
Within 120 days of receiving a study, the board must review it and propose a plan for future funding (s.94(8)). Within 15 days of proposing the plan it must send owners a notice summarizing the study and the plan (s.94(9)), and it implements the plan 30 days after that (s.94(10)).
Special assessments
If the reserve fund cannot cover a necessary expense, the corporation may levy an additional charge against owners, commonly called a special assessment. Owners contribute to common expenses in the proportions set out in the declaration (s.84). A special assessment can be large, and it is generally payable by whoever owns the unit when it is levied, which is why buyers look for one before they commit.
What to read before you buy
- The status certificate, which must state any assessments levied and the current reserve fund position.
- The most recent reserve fund study and the notice of the future funding plan.
- Whether the plan relies on steep future increases in contributions.
- For older conversions, the condition of original elements such as brick, timber and windows, which may have long or uncertain repair cycles.
Your lawyer reviews the status certificate; you may also want a professional who reads reserve fund studies to review the study itself.