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Welcome to the condominium style of living!!

You will find valuable information in the articles below to help you adjust to living in a condominium.

• • Election of Condo Directors
• • The Pitfall of Energy Savings in Shared Facilities
• • What the Condominium Act Allows or Disallows
• • Do Condo Directors Get Paid?
• • The Term of a Condo Director
• • Owner-Occupied Units
• • How Many Condo Directors?
• • Reserve Fund Study
• • Reserve Fund
• • Shared Facilities
• • Condominium Directors
• • Condominium Management
• • Condominium Governance
• • Condominium Corporation
• • I Live in a Condo

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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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Condominium Management

Condominium corporations, in many aspects, are like business corporations.

In the business world, shareholders are the actual owners of a business corporation. They, according to some predefined rules and procedures, elect or appoint someone (or some people) to the Board of Directors of that corporation. A director on the Board of Directors has a fiduciary duty to look after the interests of the people who “send” (i.e., elect or appoint) him/her to the Board of Directors.

The Directors usually do not involve themselves in the day-to-day management of the corporation. They are in a supervisory role, or an over-seeing capacity. They establish and approve directions and general policies. They answer to the shareholders.

For day-to-day management of the corporation, they appoint, or approve the appointment of the head of the corporation: the President. They may also approve the appointment of other key officers of the corporation such as the Secretary, the Treasurer, and/or some senior vice-presidents (VPs).

Some corporations use different names, e.g., Chief Executive Officer (CEO) for President, Chief Financial Officer (CFO) for Treasurer, Chief Operating Officer (COO) for VP of Operations, Chief Information Officer (CIO) for VP of Information and Technology.

These officers of the corporation are involved in the day-to-day management of the corporation. They hire managers and staff to perform daily operations, such as processing an order, ordering supplies, etc.

Condominium corporations are usually structured in a similar way, even though the Condominium Act mandates the top two levels of corporate structure: the Board of Directors and the officers of the corporation.

Members of the Board of Directors in a condominium corporation are generally elected by the condo’s unit owners at the Annual General Meeting (AGM), but they can be appointed under certain specific circumstances.

The next level of management are the officers of the condominium corporation. The Condominium Act 1998 says that a condominium corporation has to have a President and a Secretary [1]. A condo’s By-laws may allow for other positions such as Treasurer, Vice-President(s), and other positions.

The Act also says [2] that the President of a condo Corporation has to be elected among the directors themselves, so that means the President must also be a director. All the other positions, including the Secretary, may be elected or appointed. Most commonly, the members of the Board of Directors will wear two hats and play double-role; they also take up a position as an officer of the condo corporation.

Similar to that of a business corporation, a condo’s Board of Directors manages the condo affairs from a macroscopic perspective, while the condo’s officers manage the day-to-day operations. The hands-on execution of daily tasks are usually carried out by a property manager.

A condo can hire a property manager as its employee, or contract out the service to a property management company. The Condominium Act 1998 does not stipulate in this respect.

Most new condos have over 100 units (if not hundreds of units), so it’s economical to contract out the property management service. However, in some smaller (older) condos that have only a handful (say, 30 or so) of units, it would be very, very costly to contract out the tasks to a property management company, or even hire a property manager. So, members of the Board of Directors usually just share the workload and take on the daily tasks hands-on themselves.

The three Corporations of the Grandview Way residential complex have contracted out property management function to DEL Property Management Inc.

[Note 1] Condominium Act 1998 Section 36, subsection (1):
A corporation shall have a president and a secretary and all other officers that are provided for by by-law or by resolution of the directors.

[Note 2] Condominium Act 1998, Section 36, subsection (2):
Subject to the by-laws, the directors,
(a) shall elect the president from among themselves;
(b) shall appoint or elect the secretary; and
(c) may appoint or elect one or more vice-presidents or other officers.

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