Reserve Fund Studies/Depreciation Reports
What is a Reserve Fund?
A Reserve Fund is a separate fund used for paying for the major repair and replacement of the common elements and assets of the corporation. This can include exterior wall claddings, roofing, windows, doors, heating and cooling systems, site elements including roads, sewers, playground equipment etc.
What is a Reserve Fund Study/Depreciation Report?
A Reserve Fund Study/Depreciation Report is a long range financial plan that provides detailed descriptions of reserve fund requirements, cost estimates, inflationary trends, interest assumptions, and future capital requirements for major repair and replacement of common components along with appropriate funding projections.
Why do them?
Without a plan to finance the repair and replacement of future common element items all monies must be provided by the owners at the time of the replacement. This can be financially very difficult for some owners and also provides for inequity for someone who has just bought into a property and finds out that they are now responsible for a major repair cost of a common element.
Who needs them and how often?
In Alberta any Condominium Corporation with greater than 12 units is required by law to have a Reserve Fund Study done by a qualified person within two years of the Condominium plan being registered. After that, a new study is required every five (5) years. The Reserve Fund Study in Alberta covers all common components that require replacement within the next 25 year period.
In British Columbia* all Strata Corporations with 5 or more strata lots to have a Depreciation Report done by a qualified person. After that a new study is required every three years. The Depreciation report in British Columbia covers all common components that require replacement over a 30 year period. Exemption from this Depreciation Report can only be done with 75% approval of the strata owners by way of a special resolution passed every 18 months. With Reserve Fund Studies/Depreciation Reports becoming mandatory throughout most of Canada, it is likely that such a resolution will not be common practice but the rare exception.
*In the Province of British Columbia a Reserve Fund Study is called a Depreciation Report.
Who can do them?
The majority of Reserve Fund Studies/Depreciation Reports in Canada are done by Certified Reserve Fund Planners (CRPs) and Engineers. Reserve Fund Planners have completed training to specifically conduct Reserve Fund Studies/Depreciation Reports in any jurisdiction in Canada.