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Necessary Repairs and Replacements for the Condominium Act Print E-mail
One part of the condominium act that badly needs improvement is Section 93, the Reserve Fund. The main problem is that this section places absolute control over the disbursement of reserve funds in the hands of the board.  Unfortunately, the limitations on what may be considered valid reserve fund expenditures are very vague. What is “major”? What is “necessary”? How do you draw the line between a repair or replacement and an improvement or upgrade?

One trend that I have seen is that boards try to piggy-back improvements onto legitimate reserve fund expenditures. This way, the change goes through without getting the owner scrutiny that a proposed improvement should get under Section 97 of the Act.

Another trend that I have seen is for very minor items to be “charged back” to the reserve fund at the least excuse. This “nickel-dime” stuff can eventually lead to a much slimmed down operating budget, but a very bloated reserve fund budget – which, of course, makes it a whole lot easier for the board to spend owners’ money.

To make Section 93 workable, the province must:

  1. Define the term major ($500 is not major in most condominiums);
  2. Define the difference between repairs and replacements (section 93) and changes and improvements (section 97);
  3. Establish a standard code of accounts for reserve fund expenditures and reserve fund planning;
  4. Publish the procedure by which reserve fund study calculations are to be made;
  5. Establish a requirement that the board issue a reserve fund plan at the beginning of every fiscal year, detailing which items in the study have come due, which ones they will or will not pursue and what the estimated costs will be.
  6. Establish a reporting procedure that forces reserve fund expenditures to be reconciled with the reserve fund plan on an annual basis, at the end of each fiscal year;

Without these measures, owners will inevitably see a continuing shift of funding from the operating budget, for which the board is accountable to owners, to the reserve fund budget, where the board can say the professionals made them do it.

And that will inevitably lead to an upward spiral of our fees, as the industry finds ever more sophisticated ways to exploit amateur condominium boards by pushing unwanted or unneeded products and services through the reserve fund back door.