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Short Term Pain for Long- Term Gain

Sally Thompson
Publication date:
July 1, 2020
Article Summary: 

Creating financial success in condominiums requires addressing the issue of underfunded reserve funds in the short term to avoid long-term financial challenges. The current Condominium Act in Ontario sets reserve fund contributions too low, leading to inadequate funding for major repairs and replacements in the future. The Act's minimum 30-year timeframe for reserve fund studies understates the required contributions in the early years, leaving future owners to bear the burden of deferred maintenance and increased costs. Many condominium boards opt for phase-in periods and delay increasing maintenance fees to avoid short-term increases, but this approach only exacerbates the problem for future owners.

The Ministry's reopening of consultations on reserve fund legislation and regulations offers hope for addressing these issues and putting pressure on existing condominiums to fund appropriately. However, every condominium board can take action now by conducting more comprehensive reserve fund studies that project at least 61 years into the future (less the building's age to a minimum of 30 years) and implementing fee increases to match inflation-matched increases in funding requirements. It may be challenging in the short term, but it is necessary to create a sustainable financial future for the condominium corporations and protect the interests of future owners. Reserve fund study providers should also avoid offering studies with 10- and 15-year phase-in periods, as this approach creates irresponsible financial realities and disregards the duty of care to future owners.


Condominiums, Reserve Fund Study, Condominium Act, Funding, Maintenance Fees, Financial Challenges, Underfunded Reserve Funds, Future Owners, Phase-in Periods, Sustainable Financial Future, Inflation-matched Increases, Financial Reality.

Source Citation: 
Sally Thompson
Short Term Pain for Long- Term Gain
July 1, 2020
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