RESERVE RULES

Big or small, your complex must follow law.

Q. We live in a community that consists of only six condo units. Aside from retaining a professional chartered accountant to complete our yearly audit, there is not much work to do in our small self-managed community. Everything is well main- tained and we have a healthy reserve fund. However, we are not happy with the cost of the reserve fund study because engineers do not base the cost on the number of units, and we think this is unfair. We feel a smaller community should have to pay less for this study because it takes a lot less time to complete it. Can we just dispense with the reserve fund study? We are not afraid of emergencies or future repairs because we have lots of money in the reserve account. A. The Condominium Act is the law for all condominiums, no exceptions. The Act does require all condominiums to conduct a reserve fund study regardless of size. The requirements under the Act cannot be challenged and so you cannot dispense with the study.

The importance of your reserve fund study cannot be overstated. The auditor must receive a copy of this study and it is the only way he or she will know if you have sufficient funds to meet all future repairs and replacements. This is extremely important in order to avoid special assessments.

Dispensing with a reserve fund study is a violation of the Condo Act. Once the lawyer reviews your Status Certificate, red flags would go up when he/she reads you have skipped or dispensed with a reserve fund study. This will also send a very negative message to prospective buyers. Why would any buyer want to purchase a condo in a community that is not following the law?

If your main concern is the high cost of the reserve fund study, find out if there are other small condo communities in your area. You could work with them for a package deal if you agree to hire the same engineer.