What Happens If the Condo Reserve Fund Runs Out
Published on 29 August 2022, 07:22:56 AM
Your condo building is showing its age. Who wouldn’t after decades of hard living? Surely, a few touch ups will do.
Not necessarily. Toronto condo owners at Jane and Finch were hit with special assessments of up to $42,500 each when their condo reserve fund ran out.
The extraordinary fees are on top of common expense contributions of up to $800 monthly. The $14 million in court-ordered repairs, and mounting debts of over $9 million, add up to a hefty bill for the 321 units.
With no cleaners, security, or building superintendent, the half century old, 10-storey highrise has been allowed to deteriorate until it’s in “a dangerous and dilapidated state”, an Ontario court found. As of spring 2021, the condo reserve fund had $1.75, and the operating fund $5,000.
Worst case scenario: owners face having their units sold if the condo corporation files a lien for not paying the special assessment. It’s a cautionary tale for Ontario condo owners sitting on older buildings whose condo reserve funds have run out.
Who Needs a Condo Reserve Fund?
You and your neighbours need a condo reserve fund if you live in a strata home of any kind. That’s because condo reserve funds are mandatory in Ontario. All owners have to contribute.
Real estate basics for first time home buyers in Ontario.
What the Fund Is
Your condo reserve fund is a special account with a local bank, trust company, or credit union used for major repairs and replacements. The fund protects you from extraordinary expenses arising from serious building deficiencies, a condo corporation’s negligence, or fire, flood, or extreme weather damages.
How It’s Decided
Condo reserve funds are set aside by your condo corporation based on an obligatory reserve fund study the first year after incorporation. They are funded through your monthly common expenses fee contributions, and interest income from investing surplus funds.
Don’t worry — your study will be conducted by a condo reserve fund study engineer or other specialist, and renewed every three years. You can ask the condo board for a copy.
What home buyers should always ask about a condo reserve fund.
Planning the Reserve Fund Study (Ottawa, Toronto or Ontario Owners)
The study has both a physical assessment and financial plan for every part (component) of your building:
- common elements, like parkades and pools
- spaces owners use exclusively, such as balconies or backyards
- when repairs or replacements may be required, and estimated annual costs
- how much the corporation needs in its condo reserve fund
- and, based on the specialist’s assumptions about your building’s condition, how much to increase condo reserve fund contributions every year.
Do you need a lawyer to review the reserve condo fund?
Common Expenses Fees, Maintenance and Repairs — What’s the Difference?
Only ongoing, day-to-day operating expenses are paid from the operating fund. Caulking windows to stop rain from getting in is a regular operating expense. Replacing all balcony railings is a safety issue, and may tap the condo reserve fund. Likewise, fixing an ancient pool liner is a replacement item. Shampooing lobby carpets, or power washing an underground parkade, are ordinary maintenance costs.
Red flags you need to pay attention to when buying a condo.
Your condo reserve fund is kept separate from operating funds to prevent major repairs, replacements, and day-to-day expenses from being intermingled. That makes it easier to audit how the condo board is spending your money, and stop operating funds being diverted to capital repairs.
Why You Need a Real Estate Lawyer
You’ve achieved your goal of finding a condo you would actually want to own. Let Axess Law’s experienced real estate lawyers finalize your purchase (or sale) by completing the legal documents you need to buy a condo in Ontario.
Hire condo lawyers in Toronto.
Our professional real estate team of licensed lawyers examine your agreement of purchase and sale for essential clauses that allow you to:
- get a professional home inspection
- arrange mortgage loans the way you want
- be notified if the seller finds an offer they like better
- keep chattels and fixtures the seller owns
- assign a preconstruction condo to another buyer
- and more.
Documents to bring your real estate lawyer.
Our real estate lawyers check for the mandatory fire insurance binder you need to purchase an Ontario condo. We ensure you have the condo corporation’s declaration, financial statements and reserve fund statement. If common elements require major repairs or replacements, Axess Law can ask the seller’s lawyer to pay pending special assessments.
Why is a condo fire insurance binder mandatory?
You may have an existing mortgage you need to discharge before you get new financing for your condo purchase. Our virtual real estate lawyers or in-person legal team liaise with lenders to prepare mortgage documents you need to extinguish old mortgages and start over.
How to transfer ownership of a house in Ontario.
Our Greater Toronto Area and Ottawa lawyers meet all your deadlines in the agreement of purchase and sale. We may even negotiate with the seller’s lawyer if easily remedied negotiations go wrong. When a demand letter or court action may be required, we refer you to our trusted legal partners for advice.
Convenient Virtual Real Estate Lawyer Services
Buying or selling a condo has rarely been easier. Now you can use Axess Law’s virtual real estate lawyers to review agreements of purchase and sale, or complete real estate transactions. Meet online, 7 days a week, with Axess Law real estate lawyers anywhere in Ontario.
Are virtual lawyer services secure?
Our secure, confidential online software protects your legal documents. All you need is a home computer, laptop, tablet, or any compatible mobile device to video conference with our virtual real estate lawyers. You can e-sign mortgage discharge papers, or drop into any Axess Law office in Greater Toronto Area or Ottawa to sign in person.
Axess Law’s All-inclusive Legal Fees
Axess Law’s low flat lawyer rates are all inclusive. Buying a preconstruction or resale condo in Ontario is only $999.99 and up plus HST, and selling costs just $799.99 and up plus HST. Your bill has no extra charges or hidden surprises, and we explain it fully when we provide the final statement of adjustments.
Book Online Appointments or Toll Free
Arrange legal appointments today with Axess Law’s easy online booking form. For personal assistance, call toll free to 1-877-402-4207, or dial our local 647-479-0118 lawyer line. Confirm appointments by dropping by any open Greater Toronto Area or Ottawa law office. Axess Law has onsite parking, and easy transit access.
