Key Insights from the CAO's Reserve Fund Study: Understanding Condo Financing and Reserve Fund Practices

In Ontario, condominium owners and boards face the ongoing challenge of maintaining financial stability and planning for future repairs and upgrades. One of the critical tools available to condominium communities is the reserve fund, a pool of money set aside for the long-term maintenance of the building and its systems.

To better understand how condos across the province are managing their finances and preparing for future needs, the CAO (Condominium Authority of Ontario) conducted a comprehensive reserve fund study. 

We sat down with Jim Wallace, the Owner & President of Condominium Financial, to discuss the key points he thinks everyone should focus on from the study. Here are the three key points to focus on:

Key Insights from the CAO's Reserve Fund Study: Understanding Condo Financing and Reserve Fund Practices

1. Why Aren’t More Condos Taking Loans?

One of the most notable findings from the CAO's study is the disparity between condos that conduct reserve fund assessments versus those that take out loans. It turns out that condos that opt for a loan typically have conducted an assessment, as the two are interconnected. However, there are roughly five times as many condos doing an assessment without a loan compared to those opting for both. This raises the important question: Why aren’t more condos taking out loans or offering it as an option? The study suggests that while many condos are proactive about reserve fund assessments, financing options such as loans aren’t as commonly utilized, which may be a missed opportunity for communities looking to strengthen their financial stability.

2. Wide Representation Across Ontario

Another interesting aspect of the study is its geographic representation. The results of the survey weren’t limited to just Toronto or the Greater Toronto Area. Instead, the findings reflect a more diverse group of condos across Ontario. This broad cross-section of participants offers a more accurate representation of condo practices province-wide. For condo owners and board members looking for trends and benchmarks, the study’s data provides a more holistic view, considering various regions and not just the urban hotspots.

3. The Knowledge Gap Among Condo Owners

A surprising trend highlighted by the report is the significant knowledge gap between condo owners who are board members and those who are not. According to the study, a majority of those who were aware of best practices and the reserve fund process were current or past board members. This suggests that there is a lack of information reaching the broader condo community, which may leave many owners unaware of the importance of reserve funds, assessments, and financing options. This highlights the need for more widespread education and resources from organizations like the CAO to ensure all condo owners have access to crucial financial information, not just those actively involved in the management of the property.

The Impact of the Pandemic on Special Assessments

Additionally, the study noted an uptick in special assessments during the pandemic years of 2021 and 2022. This period, which coincided with the five-year span of the survey, saw a surprising increase in condos opting for special assessments, despite many condos initially holding off due to the uncertain financial environment caused by the pandemic. This could indicate that condo boards were more inclined to make necessary repairs and adjustments during a period of financial instability, perhaps to prepare for future challenges.

Further Resources

Our blog also offers a wealth of information on relevant condo law topics, making it a valuable resource for property managers and boards alike. Or, explore Stak’d, our library with over 10,000 hand-curated condo-related resources for additional summaries and tools, or dive deeper into our blog for more detailed discussions on topics that matter to you and your community.

CAO's Reserve Fund Study: In Conclusion 

The CAO’s reserve fund study sheds light on some crucial trends and questions surrounding condo financing and assessments. The disparity between those conducting assessments without taking loans, the lack of widespread knowledge among condo owners, and the unexpected rise in special assessments during the pandemic all point to the need for improved education and awareness within the condo community. As the results suggest, providing condo owners with more information and options, particularly regarding loans and financing, could lead to more informed decisions and better financial health for condo communities across Ontario.

📰 Financial Transparency for Condominium Board Members: A Crash Course in Managing Reserve Funds >

Understanding the results of this study is an essential step toward fostering better financial practices within the condo sector. For condo boards and owners alike, this study offers valuable lessons on the importance of proactive financial planning and the need for ongoing education and communication.

-Stratastic Inc.

P.S. Need expert financial advice for your condo? Connect with Jim Wallace, the Owner and President of Condominium Financial, or explore more financial professionals on our My Condo Vendor.

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