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, most Condominium Corporations in Saskatchewan of 12 units or greater must complete a Reserve Fund Study, however the deadline for different condominium corporations will vary.
For corporations completing their first report, the deadline is 3 years from the Act coming into force, or for newer condo corporations, within 3 years of their first annual general meeting (AGM).
For corporations created as a condominium conversion of an existing apartment building, the reserve fund study must be completed prior to the sale of any condominium unit.
An exemption from the reserve fund study requirement, in addition to the exemption for condominium corporations of fewer than 12 units, is made for condominium corporations where all of the units are owned by the same owner, and the units are rented or offered for rent to tenants who do not intend to purchase the unit(s). A final exemption is granted for condominium corporations for which all of the units are intended for agricultural purposes.
Get Sample ReportYes, the study must be updated on a five year cycle following the initial report.
The Condominium Property Regulation defines “qualified person” under section 51.1(d).
A reserve fund study can be completed by a qualified person who holds liability insurance in a minimum amount of $1,000,000 and, based on reasonable and objective criteria, is knowledgeable with respect to the components; the operation and maintenance of components and the cost/replacements of components. A qualified person includes but is not limited to:
- a) a licensed applied science technologist within the meaning of The Saskatchewan Applied Science Technologists and Technicians Act;
- b) a member of the Appraisal Institute of Canada holding the designation of Accredited Appraiser Canadian Institute;
- c) a person who holds a certificate of practice within the meaning of The Architects Act, 1996;
- d) a member of the Real Estate Institute of Canada holding the designation of Certified Reserve Planner; and
- e) a licensed professional engineer within the meaning of The Engineering and Geosciences Professions Act.
Further, if the reserve fund study is being undertaken by the condominium developer, the person completing the reserve fund study must be an independent person and cannot be:
- an owner, employee or agent of the developer;
- a property manager of the developer, or
- otherwise associated with the developer
Our team comprises qualified Certified Reserve Planners (CRP’s) and Accredited Appraisers of the Canadian Institute (AACI’s) and meet the qualified person criteria described in the 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, 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, but as per section 51 of the Regulation, “The Corporation shall determine the amount required for the reserve fund by taking into account:
- (a) the anticipated repair and replacement requirements of the common property, common facilities and services units, and;
- (b) the most recent reserve fund study and report, if any."
It is also important to know that underfunding reserve fund contribution requirements will result in guaranteed special assessments 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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