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Linda Palfi
CNC Properties
Box 47033 Creekside, Calgary, Alberta
P: 403-998-7732
F: 403-592-8002

Reserve funds mandatory under new Act


Note: This article was written in 2001, but its points remain valid.  -Linda


Common sense has been made the law in Alberta through reserve-fund requirements for condominium corporations under the Condominium Property Act that came into effect Sept. 1, 2000.


Most condo corporations, of course, already have a "rainy-day fund', which saves up money for replacement of capital items, meaning anything major that can no longer be maintained and needs to be replaced. Yet some condo boards have had their heads in the sand. They have no projections for what those future capital costs might be, and the savings toward those expenses have been unrealistically low. To protect the condo-owning and condo-buying public, these ostriches will have to withdraw their heads and look around.


By Sept. 1 of 2002 every condominium corporation in Alberta must have completed a professional assessment of its capital assets, their projected remaining life, their projected cost of replacement, and have set out a plan for funding those eventual cash requirements. In other words, we all have two years to get our condo corporate houses in order. There will be no more relying on a cash call---properly called a special assessment---every time a boiler or a roof needs replacing. Twenty-five-year cash needs plans and funding plans are mandatory.


This isn't to say that the law is entirely rigid. The funding plan can allow for borrowing or for planned special assessments on owners in future years. But if that's the plan, then at least owners and prospective purchasers know that's what they should expect.


So, will condo fees generally go up? Perhaps. And maybe that's a good thing. The owner of a house has every right to let it rot and fall down around his ears; he's only hurting himself. But in condominium all the owners would be affected if a board of directors were to ignore pressing needs for maintenance and replacement. In fact, the law did and continues to require condo boards to properly maintain the common property. Neglect is not an option.


In the years after 2002 a new requirement will see every condominium corporation presenting an annual reserve-fund report to its owners in advance of or at each annual general meeting. As well, the analysis of the capital common components (roofs, heating systems, hot-water boilers, etc), the replacement-cost projection and the funding plan must all be updated every fifth year thereafter. Disclosure requirements mean that the owners always have access to reserve fund information, and that purchasers can review the details before committing to buy a home in that condominium development.


A "qualified person" or firm must be employed to undertake the analysis of the components and their remaining life expectancy. While my retired uncle Fred was a plumber, he may not be able to assess how much money should be laid away over 25 years to replace boilers, pipes, in-ground utility lines and vent stack systems in a 150-unit townhouse complex, or in a 200-suite, multi-building, condo apartment development. Let the professionals do it. Only in condo corporations of 12 homes or fewer---if 75% of owners and unit factors agree---can professional standards be waived and the job be done in-house.


Condominiums are a big business. They constitute our homes, our places of business and our largest single investment for an increasing portion of Alberta's population. They deserve and need to be well-run and well-funded for reliable operation decades into the future. The new Alberta Condominium Property Act does the job of setting minimum standards and laying down guidelines. It gives condo boards the tools they need and must use to protect us as investors and homeowners. If there's a bill to pay, let's pay it with the smile of confidence in the future of condominium living

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