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

What is a reserve fund?

For a condominium, a reserve fund is a long-term savings fund. It is money the condominium community has put aside to cover the cost of maintaining and repairing the existing common elements of the condo corporation.    

Does the law require a reserve fund?

Yes. In Ontario, like some other jurisdictions across Canada, condo corporations are required by law to have a reserve fund. Section 93 (1) of the Condominium Act, 1998 (the Condo Act) states that the condo corporation must establish and maintain one or more reserve funds.

Moreover, Section 93(4) of the Condo Act states that the corporation must collect contributions to the reserve fund from the owners as part of their common expense fees.

What does a reserve fund cover?

Reserve funds are primarily used to cover the cost of planned, and sometimes unplanned, major repair or replacement of common elements. These could include roof replacements, HVAC systems, parking lot repaving, as well as repairs to other amenities like pools, community gardens, and wellness facilities.

Can you use a reserve fund for routine maintenance?

No. Reserve funds cannot be used for routine maintenance. A reserve fund is for major planned repairs and replacements, or emergency situations.

What about repairs or replacements in individual owners’ units?

Generally, individual unit owners are responsible for the cost of repairs, replacements, and upgrades in their individual units. An owner must refer to the corporation’s Declaration to determine the responsibilities for maintenance and repair of the units vs. the common elements.

Read Part Two – Introduction to Reserve Fund Studies: What They Are and When to Do One.