Canada: Capital Reserve Fund Exists To Minimize Special Assessments

Last Updated: August 25 2016
Article by Robert Noce

Q: Due to mismanagement over the years, the monthly fee on a condo my sister purchased in 2005 increased from $350 to $436 to $644 per month following an assessment in January 2015. Is this allowed? The reserve fund was not kept up until recently. What is the required amount for a reserve fund?

A: Yes, the increases in condominium fees are legal. There is nothing in the Condominium Property Act that provides any direction with respect to the required size of a capital reserve fund. The amount in the reserve fund will vary from condominium building to condominium building. The amount is generally determined by an engineer who conducts a reserve fund study and provides that information to the board. In Alberta, you are required to conduct a reserve fund study every five years. The engineer would determine that in year one, for example, the condominium corporation should replace the shingles, and the amount to replace the shingles is X amount of dollars.

Armed with that information, the board, when setting its budget, not only will raise sufficient funds to pay for the operating expenses of the condominium corporation, but also put money aside in order to pay for the capital improvement that will occur in 2016. I appreciate that there is generally no appetite to increase condominium fees. However, the old saying is true: Pay me now or pay me later. If there are insufficient funds to pay for the capital improvement for that particular year, then the only way the condominium corporation will get that money is to issue a special assessment. That means people will be hit with a significant one-time fee to pay for a particular capital improvement.

Helpful Hint: The whole purpose of the reserve fund is to minimize special assessments. Use the reserve fund study and budget appropriately so that current and future owners will not be burdened with bad management decisions. This is worth repeating: There is no prize at the end of the year for having the lowest condo fees in Alberta.

Q: I am the secretary/treasurer of a 37-unit condo complex. We have stored all the paper records from the past 26 years in boxes. What documents must be kept?

A: The Condominium Property Act and the regulations do not provide any guidance on this issue. I am assuming that your bylaws provide no guidance either. Therefore, I would follow the general practice that many organizations follow with respect to document retention. You are not required to keep documents forever.

Obviously, you want to keep documents/agreements to provide information with respect to ongoing relationships to protect the condominium corporation in possible litigation and ensure compliance with the law. You may want to consider developing a document retention policy that divides the document retention periods into three easy categories: permanent retention, seven-to-10-year retention, and one-year retention. The policy should also provide for periodic review and disposal of documents.

Helpful Hint: Document retention is a huge, yet important, undertaking. As condominium corporations get older, the issue of document retention becomes ever more significant.

Q: Can a condominium board use reserve funds for an item not included in the reserve fund plan?

A: No. Once a condominium corporation has obtained the reserve fund study, the board is required to put together a reserve fund study plan. It is this plan that will govern the condominium corporation with respect to capital expenditures. If a capital expenditure is outside of the reserve fund plan, then it would be inappropriate for the board to use reserve fund money to pay for an unexpected capital expense. The reserve fund money is not a slush fund to be used at any time. Rather, this money must be used in accordance with the reserve fund plan that was adopted by the corporation.

Helpful Hint: When in doubt, the board should seek a legal opinion to determine whether or not funds can be used for a particular purpose.

Q: I live in a complex that is a mixed property. The townhouses are billed directly by the utility company for their natural gas. Last year, my condo board over-budgeted the natural gas expenditures for the apartment-style condos (124) by approximately $22,000. This year, the apartment fees went down, while the townhouse fees went up by over 12 per cent. I empathize with the apartment-style condo owners, and I realize the corporation cannot reimburse them for the over-calculation of the natural gas costs, but does the board have the authority to decrease the monthly contributions for one property type and significantly increase another property type in the next budget?

A: The Condominium Property Act states that condo fees are to be determined by levying contributions on the owners in proportion to the unit factors of the owners' respective units. Or, if provided for in the bylaws, on a basis other than in proportion to the unit factors of the owners' respective units. In other words, if your bylaws allow you to calculate condo fees in a different way, other than unit factors, then you are permitted to do so. If your bylaws are silent in this regard, then it would require an amendment to your bylaws to give the board the authority to calculate condo fees on some other basis. To change bylaws, you require 75 per cent of the owners and unit factors to support that change.

Helpful Hint: I am aware of several condominium corporations that assess condominium fees on a different basis than unit factors. However, they do so because their bylaws give them that authority. Check your bylaws.

Q: If the sale of a condo falls through because of a flaw discovered at the time of an inspection request made by a potential buyer, and that flaw might be common to other units, i.e. the roof or installation of windows, do owners have the right to know why the sale fell through if the seller has notified the board? Similarly, if a sale falls through because the buyer's lawyer has recommend that their client not buy the property because the reserve funds are unacceptably low, do the owners have the right to know (again, assuming the seller has notified the board) since any failed sale attributed to these two circumstances will also negatively affect the other owner's property values?

A: If the seller wants to share this information with other owners within the complex, then it would be up to them to decide what information they would like their fellow owners to know. These kinds of building flaws and reserve fund concerns are items best raised at the AGM, when all owners in attendance have an opportunity to contribute to the discussion. As well, it gives the board an opportunity to respond to owners' concerns.

Helpful Hint: There are aspects of home inspections that are subjective, and one prospective buyer may accept a known flaw, whereas another may not. The same can be said with respect to a reserve fund, since a lower purchase price can sometimes offset a future special assessment. While the board should hear and talk about legitimate concerns, you don't want to create a mass panic situation where none is warranted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Robert Noce
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.