7.3 Reserve Fund Studies, Plans & Condominium Finances
Key Takeaways
The reserve fund principally supports nonannual major repairs and replacements. Check statutory exceptions and authorized uses before treating cash as available.
The provider’s study and report, the board’s approved plan, and the annual reserve fund report perform different jobs.
The initial process generally runs from plan registration. The five-year review runs from approval of the most recent plan.
Verify the levy purpose, total, unit allocation and due dates. A capital improvement requires a special resolution before board approval of a levy for it.
Calculate the unit’s share on the applicable allocation basis and read the signed sale contract for any buyer–seller adjustment.
Read the operating account and reserve fund together
The operating account covers administration and recurring costs such as insurance premiums, cleaning, utility costs and snow clearing. Under sections 38 and 38.1 of the Condominium Property Act, the reserve fund serves longer-term major repairs and replacements of corporation property, common property and managed property, subject to the regulations. The Act also permits uses such as reserve studies and expert condition reports. Reserve spending on capital improvements requires sufficient remaining reserve funding and either a special resolution or the necessity to comply with the statutory standards in section 38(2). Replacing obsolete property with its contemporary equivalent can count as replacement under section 38(4). Unspent reserve funds normally remain an asset of the corporation when a unit sells.
Regulation section 27 restricts commingling. Section 27.1 allows a temporary transfer during certain declared emergencies when its conditions are met. Separately, Act section 43.1 treats amounts paid for the corporation's benefit as trust money for the purpose for which they were paid. The section prescribes handling for money received by the corporation, including a separate designated account and a deposit within three days excluding holidays and Saturdays, subject to written authorization pursuant to a board resolution. Read the legal authority and accounting records before assuming one balance is available for another purpose.
Follow the study, plan and annual report
| Document or step | Role and timing |
|---|---|
| Study and provider’s report | Regulation sections 21.1–23 address qualifications, conflicts and the study. The provider inventories depreciating property expected to need work within at least the next 30 years, inspects visible components on site, reviews records and estimates the timing and cost of repairs and replacements. The written report gives findings, the funding recommendation and its basis. |
| Approved reserve fund plan | The board reviews the report and approves a plan with funding amounts and method adequate for the identified work. Give owners the approved plan before collecting funds for the matters covered. Under section 24 the corporation generally must meet the section 23(1)–(6) requirements within two years of plan registration. Under section 30, repeat the study, report and plan process on or before five years after the last plan was approved. |
| Annual reserve fund report | Regulation section 29 tracks actual and projected fund balances, receipts, expenditures and the projects associated with them. Read it with the annual financial statements, current budget and latest estimates. Act section 30(4) sets the AGM distribution requirement. |
A condominium plan of no more than 12 units may authorize the corporation to perform study-provider functions by special resolution under section 22. That changes who can perform the work. Section 25 addresses the narrow same-owner rental exemption, and section 26 requires the study, report and plan before specified conversions or sales ending that exemption. Verify eligibility, including the provider’s applicable qualification and disqualification rules. For example, a registered architect needs the knowledge required by section 21.1 and can be disqualified by being an owner in the condominium. A credential by itself does not establish eligibility.
Evaluate financing and calculate a levy
An operating budget can plan regular contributions and a reserve plan can spread foreseeable costs. Borrowing can spread cash outlays, but interest and repayment affect future budgets. Under Regulation section 31.7, check outstanding loans, the applicable revenue-based or bylaw threshold and any authorized borrowing ceiling before relying on a loan. The default benchmark is 15% of revenue in the most recent annual statements unless the bylaws specify an amount. If the new loan plus outstanding loans exceeds the greater of that benchmark and the ceiling from a prior resolution, obtain the required resolution. Check for the same-owner exception and any bylaw requiring a special resolution.
Under Act section 39.1 the board may approve a levy for purposes such as urgent unexpected repairs, unexpected operating shortfalls, reserve plan funding or satisfying a judgment. A levy for a capital improvement also requires a special resolution. Verify the purpose, total, unit allocation and installment dates in the board resolution. The board informs each owner as soon as possible. Unused levy proceeds go into the reserve fund.
If a parkade repair costs $600,000 and the corporation can appropriately allocate $200,000 from the reserve, the balance is $400,000. With a valid unit-factor allocation, a unit with 325 of 10,000 factors owes 3.25% of $400,000, or $13,000. Verify a valid alternate allocation if the governing bylaw and regulations permit one.
Separate the corporation’s claim from the sale allocation
Act section 39.2 governs the corporation’s collection rights, which can reach the owner when the board passed the resolution and the owner when the action begins, jointly and severally. A caveat for unpaid contributions and interest can create a charge under that section. Ask counsel to check the estoppel, title and resolution for due dates and balances.
In a resale with a $6,000 levy payable in three $2,000 installments, if the seller already paid one installment, $4,000 remains. Suppose the signed contract allocates all levies approved before Completion Day to the seller. The parties then account for the $4,000 under their agreement even if both installments fall after closing. A pending proposal is different from an approved levy. The parties can expressly address which pending costs are covered and how any payment, credit or holdback will be implemented.
Condominium Property Act · Condominium Property Regulation · Alberta reserve funds · Alberta special levies
A 50-unit owner-occupied condominium plan is registered on September 1, 2024, and no exemption applies. When must the corporation first meet Regulation section 23(1)–(6)?
By September 1, 2026, including obtaining the study and report, approving the plan and providing copies to owners as required.
Two years after the first resale of a unit.
Five years after plan registration.
Before the first AGM solely because the first AGM falls within 12 months.
A condominium corporation has two upcoming costs. One is regular winter snow clearing. The other is a planned major replacement of a worn common-property boiler covered by its reserve fund plan. No emergency transfer applies. How should the board budget the costs?
Charge both to the reserve because the work benefits the common property.
Charge both to the reserve whenever its balance exceeds the operating balance.
Use the reserve for snow clearing and operating funds for the planned replacement.
Use the operating budget for snow clearing and apply the reserve fund plan to the boiler replacement.
The board approves a $6,000 levy on March 10, with $2,000 installments due April 1, July 1 and October 1. The seller pays April 1. Completion is June 15, and the signed sale contract allocates all levies approved before Completion Day to the seller. What balance should the parties account for under that term?
$0 because both unpaid installments fall after Completion Day.
$4,000 allocated to the seller under the signed term.
$2,000 allocated to the seller because only one unpaid installment remains in the summer.
$6,000 allocated to the seller in addition to the amount already paid.
Sections you finish are checked off in the contents.