Yes, those big condo fee hikes are legal
Q In the past three years, our monthly condo fees have jumped from $450 per month (in 2019) to $530 per month (in 2020) to a whopping $650 per month (in 2021). As well, the board has told us that our reserve fund is too low. Some of the money from our monthly condo fees will be used to play catch-up for our reserve fund. Are these increases legal, and what is the required amount for our reserve fund? Please help! A Yes, the increases are legal. There is nothing in the Condominium Property Act that provides any direction with respect to increases for condo fees or 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 a reserve fund study provider (eg. engineer) who conducts a reserve fund study and provides that information to the board.
The reserve fund must be reasonably sufficient to provide for major repairs and/or replacement, where the repair or replacement is of a nature that does not normally occur annually. In Alberta, you are required to conduct a reserve fund study every five years. For example, the reserve fund study provider may determine that in Year 5 the condominium corporation should replace the shingles and the amount to replace the shingles is X-dollars.
Armed with that information, the board 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 shingles, which will occur in Year 5. The condominium corporation must prepare an annual report to the owners with respect to the reserve fund.
I appreciate 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 repairs and/ or replacement for that particular year, the only way the condominium corporation will get that money is to issue a special assessment. That means owners will be hit with a significant onetime fee to pay for a particular repair and/or replacement. 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. Again, this is worth repeating: there is no prize at the end of the year for having the lowest condo fees in Alberta. Roberto Noce, Q.C. is a partner with Miller Thomson LLP in both the Edmonton and Calgary offices. He welcomes your questions at albertacondolaw@millerthomson.com. Answers are not intended as legal opinions; readers are cautioned not to act on the information provided without seeking legal advice on their unique circumstances. Follow Noce on Twitter at @Robertnoce.