Reserve Fund Study

We talked about reserve fund previously. It’s the money we (the condominium corporation) set aside for “rainy days.” But how do we know that we have enough money in the reserve fund?

We have to do a study to see what needs to be repaired or replaced down the road, and how far down the road, and how much will it cost? This study is called reserve fund study, and is actually mandated by the the Condominium Act 1998. The Act also stipulates that a reserve fund study has to be conducted by qualified professionals. [1]

For condominium corporations registered under the “new” Act, they have to perform a first reserve fund study within the first year after the registration of the Declaration and Description of the condominium corporation. [2]

Reserve fund study is a new thing introduced in the “new” Act. For condominium corporations registered under the “old” Act, they did not use to have to conduct a reserve fund study. As the “new” Act comes into effect, they now have to. [3] They now have to conduct their first reserve fund study within three years after the “new” Act comes into effect. [4] And the “new” Act came into effect on May 5th, 2001.

There are three kinds of reserve fund studies: [5]
- Comprehensive study – this is usually a first reserve fund study.
- Updated study based on a site inspection.
- Updated study not based on a site inspection – this is usually just a financial review.

The first reserve fund study (which is a comprehensive study) consists of taking inventory of assets (i.e. big items) of the condominium corporation, estimating the remaining lifespan of each component, and reviewing the current financial position of the reserved fund. Then an estimated projection is made as to how much money will be required to repair or replace items that are due for repairs or replacements.

At the end, a reserve fund study report will be produced, detailing the findings. The report also recommends the dollar amount (after taking into consideration the projected interest rate and inflation rate) to contribute to the reserve fund each year for the next 30 years so as to meet the obligations of “saving enough money for the rainy days.” (The 30-year time span is mandated by law.[6])

Reserve fund study, after the first one, has to be conducted once every three years, as stipulated by law. [7] (Just to be technically more complete: Each subsequent reserve fund study after the first one will alternate between a financial review and an on-site inspection.)

This year, the three corporations of the Grandview Way complex are due for conducting a reserve fund study with on-site visit. And as of writing, the reserve fund studies are already in progress.

When the reserve fund study is complete, the Board has to send a notice to unit owners in Form 15. [8]

Notes:

[1] Condominium Act 1998, Section 93, Subsection (6): “A reserve fund study shall be conducted by a person of a prescribed class who shall have no affiliation with the board or with the corporation that is contrary to the regulations made under this Act.”
Ontario Regulations 48/01, Section 32 goes on to fill in the details as what professionals are qualified to conduct the reserve fund study.

[2] Condominium Act 1998, Section 94, Subsection (4): “A corporation created on or after the day this section comes into force shall conduct a reserve fund study within the year following the registration of the declaration and description and subsequently at the prescribed times.”

[3] Condominium Act 1998, Section 94, Subsection (5): “A corporation created before the day this section comes into force shall conduct a reserve fund study at the prescribed times.” (And Ontario Regulation 48/01 Section 31 fills in the detail by defining this prescribed time.)

[4] Click here to read Ontario Regulations 48/01, Section 31.

[5] Ontario Regulation 48/01, Section 28: “The following classes of reserve fund studies are established:
  1. Comprehensive study.
  2. Updated study based on a site inspection.
  3. Updated study not based on a site inspection.”

[6] This 30-year time span actually is not stipulated in the Condominium Act 1998 itself, but in the Ontario Regulation 48/01, Section 27.

[7] The Condominium Act 1998, Section 94 just says “The corporation shall conduct periodic studies...”, and the Ontario Regulation 48/01 Section 31, Subsection (3) fills in the gap of stipulating it to be “within three years of completing the reserve fund study...”. Follow the links to read the full text of the Subsections.

[8] Condominium Act 1998, Section 94, Subsection (9)(a): “Within 15 days of proposing a plan, the board shall send to the owners a notice containing a summary of the study, a summary of the proposed plan and a statement indicating the areas, if any, in which the proposed plan differs from the study.”
Ontario Regulation 48/01 further stipulates that “the notice that the board is required to send under subsection 94 (9) of the Act shall be in Form 15.” (A copy of the Form 15 is also found in the same Ontario Regulation 48/01.)

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Reserve Fund

When we live in a house, we have to maintain the house ourselves, such as repairing the roof when it leaks, or replacing the entire roof when it’s beyond repair or too expensive to repair.

As we live in a condo, there are also things to be repaired or even replaced over time, e.g., elevators, chiller, underground garage, swimming pool. When the time comes to repair or replace these items, it is very expensive to do so.

When we live in a house, if the bathroom leaks, but we don’t have the money to fix it right away, we just tell other members of the family not to use the defective bathroom until we have the money to fix it.

But that’s totally different in a condo. If an elevator is not working, we have to repair it as soon as possible. If the chiller dies, we have to replace it at once. Money is not to be an issue here.

Money for this purpose is called, aptly, the reserve fund, and is not to be an issue here because, by law, i.e., by the Condominium Act 1998 [1], each condominium corporation has to have a reserve fund for these major (read “expensive”) repairs and replacements. [2]

Where does this money come from? It comes from your contribution to the common expenses each month, commonly referred to as the “management fee.” [3]

That means we have to save enough money for these “rainy days.” Money saved for this purposes (i.e., big repairs and replacements) are put under an account separate from the money used for daily operations (such as paying for janitorial services, management office expenses, landscaping expenses, or snow removal services).

But how do we know that we have enough money in the reserve fund? Read on.

Notes:

[1] Condominium Act 1998, Section 93, Subsection (1): “The corporation shall establish and maintain one or more reserve funds.”

[2] Condominium Act 1998, Section 93, Subsection (2): “A reserve fund shall be used solely for the purpose of major repair and replacement of the common elements and assets of the corporation.”

[3] Condominium Act 1998, Section 93, subsection (4): “The corporation shall collect contributions to the reserve fund from the owners, as part of their contributions to the common expenses.”

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Shared Facilities

In order to take advantage of the economy of scale, it’s a common practice now for builders to build several condominium corporations on a larger piece of land, to form a residential complex. This fosters a closer-knit community.

Some of the facilities are shared among the condos, typically the underground garage, and parking spots for visitors. Space permitting, some complexes may have a small park within the complex.

The Grandview Way is one of such residential complexes, with three condominium corporations (the casitas, the 88 building, and the 880 building) sharing a gatehouse, an underground garage, a parkette with a gazebo, and beautiful landscape, among other things.

Above: Garage entrance on the right,
exit on the left
(Click here to see a larger picture.)


Below: Gazebo in the parkette
(Click here to see a larger picture.)

The costs of maintaining these shared facilities as well as the costs of providing shared services (such as security, landscaping, snow removal) are split (i.e., shared) among the three condos in a predetermined formula.

There are 500 units in total in the Grandview Way complex. The casitas has 196 units, so its share is 39.2% (196 out of 500). The 88 building has 156 units, so its share is 31.2% (156 out of 500). And the 880 building has 148 units, so its share is 29.6% (148 out of 500).

Obviously the formula is based on the number of units in each condominium corporation. Had the formula been based on the footprint area of the land occupied by each condominium corporation, the share percentages could be significantly different.

So, enjoy the parkette, the gazebo, the beautiful landscape, and everything else that is shared, because every owner in any of the three condominium corporations of the Grandview Way complex pays the costs of upkeeping those shared facilities.

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Condominium Governance

In general all matters relating to condo in Ontario are governed by a series of documents. On the top of this line of authority is the Condominium Act 1998 [1]. In complement to the Act are two Regulations [2] that basically fine-tune the main legislation, i.e., the Condominium Act 1998. (More on the Regulations in later articles.) These two documents are like the “grand constitution” of all condominiums in Ontario.

The next document in line of authority is the Declaration and Description of the condominium corporation that the builder registers with the Land Registry Office during the process of creating the condominium corporation. This is like a “mini constitution” of a particular condominium corporation, and is specific to that particular condo. The Declaration and Description of TSCC #1446 (the 880 building) was registered on July 18, 2002 by Eminent Construction Limited.

"Wait a minute!" You'd say, "I thought the Grandview Way residential complex is a DEL condo that was built by Tridel." Yes, it was. Typically, developers like Tridel would set up a limited company for each building project. One of the reasons is that because under certain scenarios, builders are required by law to disclose if they are being sued. So, if the building project should result in any lawsuits, it won't negatively affect other ongoing projects. Tridel in this way acts like an umbrella company.

The Declaration and Description of TSCC #1446 (the 880 Grandview Way building) contains, among other things, information about the shared facilities. (Again, more on this later.)

The next level down are the By-laws of the condominium corporation. The By-laws give more specific rules as to how the condo should be run. The By-laws of TSCC #1446 (the 880 Grandview Way building) specifies, among other things, how the condo is to be managed through the Board of Directors as well as Officers of the Corporation.

The lowest in the line of authority are the Rules. Rules deal with very specific day-to-day operations of the condo (such as a Rule that allows or disallows pets). Rules are made by the Board of Directors after passing a resolution in a Directors’ meeting. The Condominium Act also has specific requirements on communicating the proposed rules to the owners of the condo before the rules become effective.

Earlier this year a Rule regarding visitor parking was passed by the each Board of Directors of MTCC #1113 (the casitas), MTCC #1132 (the 88 Grandview Way building), and TSCC #1446 (the 880 Grandview Way building). So, the Rule is now in effect. But, do you know what the Rule is about?

Hierarchy of authority:
1) The Condominium Act over-rules the Declaration and Description;
2) The Declaration and Description over-rules the By-laws;
3) The By-laws over-rule the Rules.

Therefore, Rules may not contradict By-laws, By-laws may not contradict the Declaration, and Declaration may not contradict the Condominium Act. The Act also says that if any part below (Declaration, By-laws, or Rules) contradicts the Act, that offending part will be rendered useless.

[Note 1] The Condominium Act 1998 is Chapter 19 of the Statutes of Ontario 1998 (S.O. 1998, c.19). For a complete text of the Act, see http://iijcan.net/en/on/laws/stat/so-1998-c-19/latest/so-1998-c-19.html

[Note 2] There are two Regulations that supplement the Condominium Act 1998. The Ontario Regulation 48, 2001 (O. Reg. 48/01) General, and the Ontario Regulation 49, 2001 (O. Reg. 49/01) Description and Registration. For a complete text of both Regulations, see http://iijcan.net/en/on/laws/regu/o-reg-48-01/latest/o-reg-48-01.html and http://iijcan.net/en/on/laws/regu/o-reg-49-01/latest/o-reg-49-01.html.

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Condominium Corporation

Every condo in Ontario by law has to have a condominium corporation. By what law? By the Ontario Condominium Act.

What is a condominium corporation for?

Its existence is to manage the operations and to protect the common interests of the condominium on behalf of all unit owners. A condominium corporation is different from a business corporation that one often hears about; it is a not-for-profit corporation. It is created by the builder, when developing the condominium project, at a certain specific stage by registering the condominium with the Land Registry Office.

Condominium matters are not a federal thing but a provincial thing; i.e., it falls within the provincial jurisdiction. Therefore the Condominium Act in Ontario is not the same as a condominium act in another province.

Ontario condominium corporations have been governed by the Ontario Condominium Act since 1978 (the “old” Act). In December 1998, the Ontario Government substantially revised the “old” Act into the “new” Act, the Condominium Act 1998, which came into force two years later on May 5th, 2001.

Each condominium corporation is given a “name”, which consists of a designation and a number. In the Grandview Way residential complex, for example, the casitas is MTCC 1113, and the 88 Grandview Way building is MTCC 1132, while the 880 Grandview Way building is TSCC 1446.

But what do “MTCC” and “TSCC” mean? MTCC stands for “Metropolitan Toronto Condominium Corporation”, and means that the condo was registered under the old Act. TSCC stands for “Toronto Standard Condominium Corporation”, and means that the condo was registered under the new Act.

Technically, the legal name of a condo is the fully spelled name of MTCC or TSCC, not just the abbreviation “MTCC” or “TSCC”. For example, the 88 Grandview Way is "Metropolitan Toronto Condominium Corporation No. 1132", and the 880 Grandview Way is "Toronto Standard Condominium Corporation No. 1146."

Other regions have different designations. For example, north of Toronto, York Region condos are either “York Condominium Corporation” (or YCC) under the old Act, or “York Region Standard Condominium Corporation” (or YRSCC) under the new Act.

The numbering at the end of the condo’s name is just a number in sequence to distinguish one condo from another, and is unique within each region. That means, Toronto maintains its own sequence while York Region maintains its own separate sequence.

And you probably guessed it, the smaller the number, the older the condo. In general, condos with close numbers mean that they were built at around the same time.

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I Live in a Condo

I live in a condo in Grandview Way. But, where is Grandview Way?

Grandview Way is a residential complex located in North York, south of Finch and east of Yonge. Since the amalgamation, North York has become part of the City of Toronto. The Google map below tells you more precisely where Grandview Way is:

View Larger Map

This entire residential complex was built by the developer Tridel under the project name “Northtown”. It consists of three condominium projects:

• The casitas (or more commonly known as the townhouses), the condominium townhouses completed in 1995 under the project name “Northtown Casitas 1”.
• The 88 Grandview Way building – the condominium building completed in 1996 under the project name “Grandview Tower”.
• The 880 Grandview Way building – the condominium building completed in 2002, under the project name “Parkside”.

Click here to see a larger picture.
Main entrance of the Grandview Way residential complex
(The gatehouse in the middle, the 88 building on the right,
the 880 building on the left, with the casitas on the far background.)

With the addition of the newest and latest building (the 880 building), the Grandview Way residential complex is now complete. This entire complex was managed by DEL Property Management Inc., an affiliation (if not a subsidiary) of the developer Tridel.

Right across the street Doris, there is a supermarket Metro (used to be Dominion) that opens 24 hours. Grandview Way is about halfway between the Finch subway station and the North York subway station. It takes about 10 to 15 minutes to walk from Grandview Way to either subway station, depending on how fast you walk.

Along Yonge Street in this area, there are many restaurants serving a variety of ethnic food such as Korean, Middle Eastern, Indian, and of course, the main stream western food. . It is just a few blocks away from the Mel Lastman Square and the North York Civic Centre, the centre of North York.

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INDEX

Articles in chronological order:

1. I Live in a Condo
2. Condominium Corporation
3. Condominium Governance
4. Condominium Management
5. Condominium Directors
6. Shared Facilities
7. Reserve Fund
8. Reserve Fund Study
9. How Many Directors?

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