Condominium reserve funds: What to know

What are condominium reserve funds?

Condominium reserve funds in Alberta are funds used to pay for major repairs and replacements. They help condominium corporations plan for long-term building needs, such as roofs, elevators, boilers, windows, parking areas, and other shared assets, instead of relying only on sudden special assessments when major work is needed.
 

Condominium reserve fund vs. operating fund

A condominium corporation’s operating fund and reserve fund serve different purposes. The operating fund covers the regular costs of running the community, while the reserve fund supports major capital repairs and replacements.

For example, routine elevator maintenance may be paid from the operating fund, while a major elevator modernization project may be paid from the reserve fund.

Understanding the difference helps condominium board members budget more accurately and helps owners understand how their condominium fees are being used.
 

Common expenses covered by condominium reserve funds

Condominium reserve funds may cover major, non-annual repairs or replacements such as:

• Roofs: Repairing or replacing roofing systems when they reach the end of their useful life.
   
• Elevators: Modernizing elevator systems or replacing major elevator components.
   
• Parking areas: Resurfacing parking lots, driveways, or related surfaces.
   
• Building envelope: Repairing exterior walls, windows, balconies, doors, and waterproofing systems.
   
• Mechanical systems: Replacing or repairing boilers, heating systems, cooling systems, pumps, and major plumbing components.
   
• Electrical systems: Repairing or replacing major electrical equipment that serves the condominium.
   
• Amenities: Repairing or replacing shared amenities such as pools, fitness rooms, clubhouses, and recreation areas.

How condominium reserve funds are funded

Condominium reserve funds are typically funded through owner contributions collected as part of regular condominium fees. The amount contributed to the reserve fund should be guided by the condominium corporation’s reserve fund plan, which is informed by the reserve study.
 

Reserve studies

A reserve study is a professional review of the condominium’s depreciating property. The study looks at shared assets, their condition, their expected useful life, and the estimated cost to repair or replace them. The report then helps the board create a plan for how much money the corporation should collect and set aside for future work.
 

Reserve study requirements in Alberta

In Alberta, a condominium corporation must complete a reserve study, reserve fund report, and reserve fund plan every 5 years, and the first study must generally be completed within 2 years after the condominium plan is registered (Condominium Property Regulation, Alta Reg 168/2000, ss. 24, 30).
 

How much should be in a condominium reserve fund?

In Alberta, the appropriate reserve fund balance should be based on the condominium corporation’s reserve study.
 

What Alberta law says about condominium reserve funds

Alberta’s Condominium Property Act includes several key provisions about reserve funds:

• Condominium corporations must establish and maintain a reserve fund that is reasonably sufficient for major repairs and replacements that do not normally occur every year. This applies to the corporation’s real and personal property, common property and managed property (Condominium Property Act, s. 38(1)).
   
• Reserve fund money can be used for required reserve fund studies and reports, as well as certain expert reports examining the condition of the corporation’s property, common property or managed property (Condominium Property Act, s. 38(1.01)).
   
• Reserve funds generally cannot be used for capital improvements unless the use is authorized by special resolution or is necessary to comply with health, building and maintenance and occupancy standards as required by law, and enough money will remain in the reserve fund (Condominium Property Act, s. 38(2)).

Regularly review your reserve study

It is also important to treat your reserve study as a living, breathing document that should be regularly reviewed and updated in consultation with your reserve fund planner.

"For example, your reserve study may indicate that a roof should be replaced in 30 years. If you are 28 years in, it still looks great and you’ve done all the preventive maintenance, you can decide to get another five years out of it and adjust that component accordingly."

Jason Krippl, vice president of client accounting at FirstService Residential Alberta

What happens when condominium reserve funds are too low

When a condominium reserve fund is underfunded, the corporation may not have enough money available when major repairs or replacements are needed. This can create financial strain for the community and may require the board to consider options such as increasing condominium fees, issuing a special assessment, borrowing funds, delaying work, or phasing projects over time.
 

Benefits of condominium reserve funds

The key to protecting the fiscal health of your community is committing to consistently funding your condominium reserves over time. By doing so, your corporation can realize three distinct benefits:

1. Peace of mind: A reserve fund gives corporation members greater confidence and comfort in knowing money will be there when it is needed.
    
2. Market value preservation: When reserves exist to support shared assets in a community, the market value of properties within that community are better maintained.
    
3. Equitable cost participation: One of the main advantages of establishing and maintaining a reserve fund is that all residents who are using and enjoying community assets are contributing to their costs. Without reserves, a special assessment may be needed whereby only those residents who are living in your community at the time an asset needs to be replaced would be impacted. By funding reserves over time, generations of owners can share in the costs of assets.

A good condominium manager will offer sound guidance on establishing and maintaining funding of your reserves. At FirstService Residential, it is an essential component of the support we offer communities for successful, long-term financial planning.
 

About FirstService Residential

FirstService Residential is a leading condominium management company in Alberta, supporting condominium corporations with local expertise backed by national resources. Our teams help boards and owners stay organized with governance support, recordkeeping systems, financial management, maintenance planning, vendor coordination, resident communication, and 24/7 customer care.

To learn more about how we can support your community, contact FirstService Residential today.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.