This is Part Two of a three-part series on reserve funds.

What is a reserve fund study?

A reserve fund study (RFS) is a detailed plan or roadmap that enables the condominium community to put aside enough money in its reserve fund to keep the building safe and well maintained into the future.

Are reserve fund studies required by law?

Yes. Section 94 (1) of the Condominium Act, 1998 (the Condo Act) states that condo corporations: “shall conduct periodic studies to determine whether the amount of money in the reserve fund and the amount in contributions collected by the corporation are adequate to provide for the expected costs of major repair and/or replacement of the common elements and assets of the corporation.” 

Can you hire anyone to do a reserve fund study?

No. An RFS must be completed by a person of a prescribed class. Examples include: an architect, an engineer, or an engineering technologist. There are additional restrictions in section 32 of Ontario Regulation 48/01 to ensure the expert is independent. For a complete list of who can prepare an RFS, see: Section 32 of Ontario Regulation 48/01.

Are there different types of reserve fund studies?

Yes. There are three different types of reserve fund studies:

• Class 1: Comprehensive study. This requires the RFS provider to physically inspect the property, review and verify the records of the corporation, and interview the condo corporation’s directors, agents (condominium managers, lawyers, and others), and employees that the provider deems appropriate.
• Class 2: Updated study with site inspection.
• Class 3: Updated study with no site inspection.

All three classes require a legislated minimum 30-year timeline for the projections.

When do reserve fund studies occur?

A condo corporation must complete a class 1 study within the first year following registration of the declaration and description. After that, a Class 3 study must be completed within three years, followed by a Class 2 within 3 years after that date. Class 2 and Class 3 studies then must be completed every 3 years on an alternating basis.

What goes into a reserve fund study?

The actual content of the RFS is regulated under section 29 (1-3) of Ontario Regulation 48/01.

A Class 1 or Class 2 RFS must include both a physical and financial analysis. The physical analysis includes reviewing the component inventory to determine the actual or estimated year for repair or replacement of each component. A Class 3 study shall be based on a verification of records of the corporation. To be included in the component inventory, the replacement cost must be no less than $500.

Read Part Three – Introduction to Reserve Funds: How to Manage a Reserve Fund Study Process