Reserve Fund Studies
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What is a Reserve Fund Study?
A Reserve Fund Study is a plan for the long term funding of the shared components of your Condominium Corporation. This may include items such as the roof, windows, exterior paint, common corridor carpeting, mechanical systems, plumbing systems, etc. The report provides a path for budgeting for those longer term expenditures which do not occur every year, but that the owners collectively are responsible to replace and repair.
What's Included?
The reserve fund study will include a description and estimated life expectancy, typically over 30 years, of items identified as appropriate for the study's purpose and scope. This may include, but is not limited to:
- The building's structure
- The building's utilities
- The exterior of the building, including the roof, doors, windows and skylights
- Landscaping
- The systems of the building, including the plumbing, heating, electrical, fire protection and security
- The building's interior finishes, including furnishings and floor coverings
- Common facilities and amenities of the property
- Green building components
- The building's parking facilities and roads
- Balconies and patios
FAQ's
Generally, all condominium corporations in the Yukon are required to establish and maintain a reserve fund and obtain a Reserve Fund Study, unless a limited exemption applies under the Condominium Act.
For new condominium corporations, a Reserve Fund Study must be completed before the first Annual General Meeting (AGM).
For existing condominium corporations less than 10 years old on October 1, 2022, a Reserve Fund Study must be in place and updated at least every five years to reflect current conditions and funding requirements. Condominiums that are 10 years or older on October 1, 2022, the day of the coming into force of the Act, are exempt from reserve fund requirements for a period of five years. Before the end of that period, these condominium corporations may waive reserve fund requirements by special resolution for additional periods of up to one year.
A Reserve Fund Study must be prepared by a qualified person and is intended to identify major common property components, estimate future repair and replacement costs, and support long-term financial planning for the corporation.
Get Sample ReportYes, the study must be updated on a five-year cycle following the initial report.
Under the Yukon Condominium Act and Reserve Fund Regulation, a Reserve Fund Study must be prepared by a qualified person.
A Reserve Fund Study must include:
- A statement by the qualified person describing their qualifications;
- The date the study was completed;
- The signature of the qualified person who prepared the study.
The Act defines a qualified person as any of the following:
- a) a Chartered Professional Accountant (CPA) within the meaning of the Chartered Professional Accountants Act;
- b) a Fellow of the Canadian Institute of Actuaries;
- c) a member of the Appraisal Institute of Canada holding the Accredited Appraiser Canadian Institute (AACI)designation;
- d) a person licensed to practise as an architect under the law of a province;
- e) a member of the Real Estate Institute of Canada holding the Certified Reserve Planner (CRP) designation;
- f) a member of the Canadian National Association of Real Estate Appraisers holding the Designated Reserve Planner (DRP) designation; or
- g) a professional engineer within the meaning of the Engineering Profession Act.
Additional qualified person options exist for condominium corporations of not more than 12 units.
Our team includes Certified Reserve Planners (CRPs) and Accredited Appraisers (AACI) and meets the qualified person requirements under the Yukon Condominium Act and Reserve Fund Regulation.
The Reserve Fund Study will state the reserve fund balance at the date of the study, and will include funding plan scenarios for each year of the study which will indicate the adequacy of the reserve fund as defined in the Condominium Property Act and the Condominium Reserve Fund Regulation, 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.
The condominium board shall ensure that a copy of the reserve fund study is attached to the annual report for the corporation.
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 likely that a funding scenario presented in the finished report will suggest increased contributions over time, and may also reveal if future special levies or 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. However, the condominium corporation must determine the contribution having due regard to the most recent reserve fund study in accordance with Part 158(b) of the Condominium Act.
It is also important to know that underfunding reserve fund contribution requirements will result in guaranteed special assessments levies 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.
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