Reserve Fund Studies

Yes, the study must be updated on a five-year cycle following the initial report. The five years is calculated as being the end of the fifth year covered by the study or most recent update.

This is well defined in the Act. Subject to limitations noted in Sections 25(2) of the Act, the following persons may conduct a reserve fund study:

a) a person who holds a valid registration under The Architects Act to practice as an architect in Manitoba;

b) a person who holds a valid registration under The Engineering and Geoscientific Professions Act to practice as a professional engineer in Manitoba;

c) a person who holds a valid certificate as a certified applied science technologist or certified engineering technologist under The Certified Applied Science Technologists Act;

d) a member of the Appraisal Institute of Canada who holds a valid designation as an Accredited Appraiser Canadian Institute;

e) a member of the Real Estate Institute of Canada who holds a valid designation as a Certified Reserve Planner.

Section 25(2) of the Act restricts persons conducting a reserve fund study. A person who conducts a reserve fund study may not be

a) a director, officer or employee of the condominium corporation;

b) a manager under a property management agreement with the condominium corporation;

c) a partner, employer or employee of a person referred to in clause (a) or (b);

d) the spouse, common-law partner, son or daughter of the spouse or common-law partner of a director or officer of the condominium corporation;

e) a unit owner of the condominium corporation;

f) an occupant of a unit in the property.

Lastly, despite section 25(1) and 25(2), a person may conduct a reserve fund study (other than a study required under section 50 of the Act) if

a) the property that is the subject of the reserve fund study meets each of the following criteria:

i. it includes fewer than 10 units,

ii. it does not include any building that is more than two storeys above ground,

iii. it does not contain an elevator,

iv. it does not include underground parking facilities; and

b) the person is knowledgeable – in the board’s opinion and based on reasonable and objective criteria – about the items or types of items included in the component inventory, their operation or maintenance and their repair or replacement cost. Our team comprises qualified Certified Reserve Planners (CRP’s) and Accredited Appraisers of the Canadian Institute (AACI’s) as described in The Condominium Act.

The Reserve Fund Study will state the reserve fund balance at the date of the study, and for each year of the study (minimum 30 years) will indicate the ideal balance of the reserve fund, the current anticipated repair and replacement costs for each given year, and an opinion on the adequacy of the current rate of funding for the reserve fund.

When deciding total contributions to the reserve fund, the directors of the condominium corporation must consider the reserve fund balance that is recommended in the latest reserve fund study or update.

Therefore the Reserve Fund Study will be a valuable tool for budgeting, and for planning the repair and replacement schedule for your Condominium Corporation.

The Reserve Fund Study will analyze the current state of your reserve fund relative to the long term financial obligations of the Condominium Corporation to repair and replace the various shared building components. This review will provide an indication if your Condominium Corporation is already on a proper funding path based on present contributions, or if additional funding may be necessary to adequately cover upcoming costs.

It is possible that a funding scenario presented in the finished report will suggest increased contributions over time, and may also reveal if future special assessments may be required. However, the funding recommendations in a Reserve Fund Study only deal with the contributions to the reserve fund, not contributions to the operating fund.

No, the Condominium Corporation is under no obligation to follow the recommendations, but rather the Condominium Board must “consider the reserve balance that is recommended” in the Study (see part 144(2) of the Act). There is no minimum reserve fund balance indicated in the Act, only the requirement to maintain a reserve fund.

It is also important to know that underfunding RF contribution requirements will result in guaranteed special assessments for condominium corporations at some point in the future.

The fee to conduct a Reserve Fund Study is affected by primarily:

a) The size/scale of the Condominium Corporation, including total number of units;

b) The complexity of the Condominium Corporation, including number of reserve components, and legal structure of the development;

c) Age of the Condominium Corporation, if important documents such as Architectural drawings are unavailable.

The typical fees for a Reserve Fund Study will range typically from a few thousand dollars for a basic small Condominium Corporation, to perhaps over ten thousand dollars for a large complex Condominium Corporation. However, on a cost per owner basis, Reserve Fund Studies are inevitably the most costly per owner in small Condo Corporations, and the least costly per owner due to economies of scale for large Condo Corporations.

The time frame for completion of a Reserve Fund Study from the date ordered to finalized report will typically take over one month for the most straight forward assignment, to several months for highly complex Condominium Corporations. This is due in part to the typical process for document gathering (which may often take weeks to gather), as well as the timing/frequency of Board meetings. Therefore, if the goal is to incorporate recommendations from a Reserve Fund Study into an upcoming annual budget, a lead time of at least a few months will be necessary.

If there are any additional questions you would like answered, feel free to contact us at your convenience for further information. We are happy to discuss options particular to your Condominium Corporation for your Reserve Fund Study requirements.