Reserve Fund Study

Condominium Act 1998, S.O. 1998, c. 19
https://www.ontario.ca/laws/statute/98c19#BK201

All condominium Corporations in Ontario must establish a separate reserve fund account for the purpose of major repair and replacement of their common element components.

The Corporation must collect the contribution from the owners as part of their maintenance fee to contribute to the fund.

A Reserve Fund Study must be conducted to determine the adequacy of the amount contributed to this fund.

The Reserve Fund Study consists of a physical review and inventory of the common elements followed by a financial projection to ensure future repairs and replacements can be performed as required.

Adjustments to the annual contribution are recommended based on the specific condition of the common elements and the financial position of the Corporation with the goal being to remain financially viable over a minimum 30 year time frame.

Reserve Fund Studies must be updated every three years to ensure the funding model remains adequate.

Once finalized, the Study and proposed funding plan are summarized and distributed to all owners by way of a specific form called the Notice of Future Funding of the Reserve Fund, previously called "Form 15".

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Reserve Fund Study to forecast future repairs and maintenance of the Condominium Corporation common elements in Ontario

Reserve Fund Study Classes

Class 1

Class 1 Reserve Fund Study is the very first Study performed after the development is registered as a Condominium, after that, only Class 2 and 3 Updates are required

Class 2

Class 2 is an Update to the Reserve Fund Study incorporating a return visit to the site followed by financial model updating. This class of Study is required every 6 years. This first one is required 6 years after the Class 1 Study and alternates with the Class 3 Study to provide an Update every 3 years.

Class 3

Class 3 does not include a return visit to the site but rather only the financial model updating. This class of Study is required initially required 3 years after the Class 1 Study and then every 6 years alternating with the Class 2 Study.

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Types of Condominiums

Standard Condominium

A Standard Condominium Corporation is the most common type of Condominium registered under the Ontario Condominium Act.

Each Standard Condominium can be registered with different boundaries which determine the separation of responsiblity between the Unit holder and the Corporation. It is important to understand the boundaries of the condo units and what the Corporation is responsible to maintain or replace.

As an example, at a Standard townhouse style condominium the Corporation is typically responsible for the building structure of each unit including roofs, eaves and downspouts, exterior walls, windows, doors, driveways and decks, etc. Common areas such as site roadways, parking areas, driveways, outdoors pools and landscaped areas are also included in the Corporation’s responsibilities. Each Standard Condominium can be registered with different boundaries.

Some Condominiums are registered as Standard Condominiums but have modified unit boundaries. In this case the Corporation may only be responsible for items such as the roofs and eavestroughs, or any other specific combination of building components. It is important to familiarize yourself with your condo’s Declaration in order to be aware of who is responsible for which components.

A Standard high rise style Condominium typically incorporates common elements such as the exterior envelope, roofing membrane, elevators, hallways, parking garage, boilers, chillers or recreation areas, etc.

In the case of the Standard Condominium the declaration can not be registered until the proposed building(s) have been constructed to a level as defined in the Condominium Act.

Phased Condominium

A Phased Condominium Corporation is a type of Freehold Condominium under the Ontario Condominium Act.

Phased Condominium Corporations are large developments of Standard Condominiums that are built in Phases

The benefit of the Phased Condominium is that the builder is only required to post security to Tarion for the units that are registered and under development

The other benefit to builders is that the size of the construction loan is significantly decreased as they are only borrowing for each phase instead of for the entire development.

The downside to a Phased Condominium are the costs the builder incurs when registering each phase of the development.

Common Element Condominium

A Common Elements Condominium is another type of condominium under the Ontario Condominium Act.

Common Element Condominiums differ from Standard Condominiums in that the land on which a unit resides is owned by the unit holder and the building is the full responsibility of the unit owner.

The land of the Unit holder is permanently tied to a common interest in the common elements of the Corporation.

The common elements consists of items that lie outside of the land Unit such as roadways, parking lots, storm water drainage, fire hydrants or tennis courts, etc.

Vacant Land Condominium

The Vacant Land Condominium is the last type of Freehold Condominium under the Ontario Condominium Act.

A Vacant Land Condominium Corporation consists of more than one unit at registration and contains no structures on the land being registered.

This means that the condominium plan is registered on the land before any structures are constructed hence the term "Vacant" Land.

Once a building has been constructed on a unit of land, the owner is responsible for all maintenance and repair obligations.

Tarion treats the buildings on a Vacant Land Condominium as a Freehold home, which means the builder does not need to post a security deposit.

Preliminary Reserve Fund Study

What is a Preliminary Reserve Fund Study?

A Preliminary Reserve Fund Study is created from construction drawings before the development is built in order to provide a more accurate starting contribution for the builder. Once the development is completed, this Study is reviewed and adjusted to account for any differences between the design drawings and actual construction. This type of Study is typically completed in order to provide the builder with an accurate starting contribution and avoid large increases to the monthly condo fees in the first few years after registration.

Why perform a Preliminary Reserve Fund Study?

In the competitive housing market reputation is critical. By setting an appropriate first year annual contribution prior to the sale of the condominium units, new homeowners avoid the unpleasant surprise of a large increase to the reserve fund contribution in the first year.

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