Reserve
Fund Studies
The purpose of the Reserve Fund Study is to ensure there are sufficient
funds available to make major repairs to, or replace the common element
components
and assets of the corporation.
The study will comply with Ontario Regulation 48/01 General, made under
the Condominium Act, 1998. The study will be of the Comprehensive classification.
The Condominium Act and Regulations define three different
types of Reserve Fund Studies:
•
A comprehensive study
•
An updated study based on a site inspection
•
An updated study not based on a site inspection
A comprehensive study is typically the first Reserve Fund Study
that would be carried out on the condominium property. This study
includes a site review and would meet all the requirements for
a Reserve Fund Study, as defined in the act.
As the name implies, an updated study based on a site inspection
is a study that updates an existing comprehensive study, so that
it is current as of the date of the update. As part of this update,
a site review is necessary in order to verify the condition of
the components and the timelines and costs for replacements.
An updated study not based on a site inspection is also an updated
study, but a site visit is not undertaken as part of the update.
This update involves primarily updating financial information
in the study based on information provided by the condominium
corporation.
Other items that would be updated would include cost estimates
for the replacements, assumed inflation rates, and assumed interest
rates for the reserve fund investments.
Comprehensive reserve fund studies are required for all new condominium
corporations. For condominium corporations that existed prior to
the release of the most recent Condominium Act (May 2001), there
was a three year period to get a comprehensive reserve fund study
undertaken. Thus, by now all existing condominium corporations
should have had at least one comprehensive reserve fund study and
an update undertaken.
The updates to a comprehensive reserve fund study are to be undertaken
every three years. The first update after a comprehensive reserve
fund study can be not based not on a site inspection. The alternate
update after that must be based on a site inspection. Thus, a site
review would be carried out for every other update or every six
years, approximately.
It should be noted that if a comprehensive reserve fund study is
undertaken by one company, it is difficult, if not impossible,
for a different company to undertake the update. Validation of
the information in the initial study, as well as problems copying
the data or even using a software which may be proprietary for
the calculations, generally means that if a new reserve fund study
provider is chosen that the corporation will be starting with a
new comprehensive type study.
If requesting proposals for a comprehensive reserve fund study,
it is important to ask the reserve fund study provider to also
provide an indication of what the future update costs will be as
well as the cost for the preparation of a Form 15.
A Form 15, otherwise known as a notice of future funding of the
Reserve Fund is a plan that the Board is required to propose
within 120 days of receiving a final reserve fund study. Within
15 days of proposing the plan, the Board is required to 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. The Board
is also required to send to the auditor a copy of the study,
a copy of the proposed plan and a copy of the notice sent to
the owners. Further, the Board is required to implement the proposed
plan within 30 days of when the notice was sent to the owners.
Very often, Reserve Fund Study providers will prepare the Form
15 on behalf of the Board. Much of the information in a Form 15
comes directly from the Reserve Fund Study. A Form 15 can be viewed
by clicking
here.
- A Physical Analysis of Common Element Components:
a) Reviews the
condition and life expectancy of the components
b) Comments on site conditions that may affect life expectancy
c) Estimates remaining life or need for major repairs
- A Financial Analysis
a) Estimates costs for major repairs or replacements
b) Provides a 30-year projection for when major repairs or replacements
will be necessary
c) Develops a cash flow scenario to show how to properly fund
the reserve
- Corporations created on or after May 5, 2001, must obtain
a comprehensive study within one year of registration.
- Corporations
created before May 5, 2001, must obtain a comprehensive
study by May 5, 2004, OR conduct an updated study based on
a site inspection, if a comprehensive study that meets
the
requirements of Ontario Reg. 48/01 is already in hand.
- There are three classifications of studies:
a) Comprehensive - consists of a physical analysis and a
financial analysis
b) Update based on a site visit - can be done if there is
already a comprehensive study done that meets the requirements
of Ontario Reg. 48/01.
c) Update not based on a site visit - can only be done if
the study just prior was a comprehensive study or an update
based on a site visit.
-
A reserve fund that is found to be inadequate
must be brought up to an acceptable level within 10 years
of the date the first
reserve fund study is done, on or after
May 5, 2001.
- Consulting Engineers – CDW Engineering has the expertise
that will provide the professional advice you can trust
and depend on.
- Experience - CDW Engineering has over 20 years experience
helping directors make informed and correct decisions.
- Specialization - CDW Engineering specializes in Reserve Fund
Studies and inspections only; no follow-up services are provided,
thereby
ensuring unbiased professional information with no conflict
of interest.
- Focus - Small to medium-sized residential and business condominiums
are our primary focus.
- Value - Prompt, professional service. Accurate and informative
studies including a post study meeting with the board of directors.
