What is a Reserve Fund Study?
Essentially a Reserve Fund Study (RFS) is a 25-year plan to repair or replace capital assets of the corporation, so items like the roof, heating system, exterior doors, etc. A portion of the condo fee goes into a Reserve Fund to help pay for these items.
Reserve Fund Study: the physical inspection of the condominium’s depreciating property – this is a site visit that is conducted by the reserve fund planner and often the board will walk the property to discuss any issues since the last study was completed.
Reserve Fund Report: the written document outlining all the findings from the reserve fund study. The report must identify what may need to be repaired or replaced, assess the present condition of the property and estimate when it will need to be repaired or replaced, and estimate the costs of repair or replacement (at a cost no less than current costs).
Reserve Fund Plan: this is a large spreadsheet that demonstrates how much money is needed to maintain the reserve fund based on the report. The Plan will start with the current level of funds in the reserve fund, then show the items slated for repair or replacement each year, the amount of money required to pay for the items, and an ending balance for that year. This is where you will see if they plan to have a special levy or assessment or increase condo fees to cover any shortfalls in the Plan.
Reserve Fund: A separate bank account to help pay for the items listed in the Reserve Fund Plan. Many condo corps will invest some of this money into higher interest savings accounts.
The funds in the Reserve Fund can only be used for items in the Plan, unless a special resolution has been called and at least 75% of owners agree to use the funds for a specific purpose.
When a condo plan is first registered (so a new build) the corporation has 2 years following registration to complete a reserve fund study and report, and then must complete a study every 5 years afterwards. Corporations also have the option to do them more often than 5 years.
If a condo has fewer than 12 units, the owners can choose how to conduct a RFS. They may hire a planner, or by special resolution, let the corporation be its own reserve fund study provider (must still meet all criteria and guidelines for the reserve fund study and report).
Annual report: the corporation must prepare an annual report on the reserve fund. It must include:
- Amount of reserve fund on the last day of the preceding fiscal year
- All payments made into and out of the refund that year
- A list of the property that was repaired or replaced and the costs incurred
- Total payments by ordinary or special resolutions
- List of any property projected to be repaired or replaced during the current fiscal year, including the projected costs of the repairs and replacements.