Since reserve fund studies are only completed for condo corporations once every five years, here is a quick summary of what Alberta condo legislation says about reserve fund studies. Five years from the day the most recent reserve fund study was approved, a new reserve fund study must be ordered that must include an inventory of all depreciated property on the parcel that must be repaired or replaced in the next 30 years, the present condition of the depreciated property, an estimate of the cost to repair or replace the depreciated property, and the life expectancy of each component of the depreciated property once the property has been repaired or replaced. The reserve fund study provider must determine the current amount of funds in the corporation’s reserve fund, conduct an on-site visual inspection of all visible components of the depreciated property, interview the board members, interview the condominium manager, and review relevant documents including construction and maintenance documents. The reserve fund study must recommend the amount of funds that should be in the corporation’s reserve fund and describe the basis of determining the amount of funds required.
Key Condo clients always receive four quotes for a new reserve fund study. Two of the quotes will be from an engineering firm and the other two quotes will be from a non-engineering firm. It’s recommended that any condo that was constructed more than 10 years ago have an engineer complete the reserve fund study. The major reason for this is engineering firms have access to more detailed construction cost rate sheets, so their estimated pricing for building component replacement will be more accurate. We find that it causes less stress for condo boards when the budgeted amounts are close to actual costs.
Key Condo recommends requesting the reserve fund study provider complete their onsite visit in the summer months when your building components aren’t covered in snow! In some cases this means that you might start the renewal process 6-9 months before your study actually expires. For example, if your current reserve fund study expires in February or March, you might want your reserve fund study provider to complete the onsite inspection in September.
Since the reserve fund study is a financial document, it’s strongly recommended that your reserve fund study aligns with your fiscal year end and that this is clearly stated in the 30-year cash flow projection section of your reserve fund study. It’s also recommended that your monthly/ quarterly and annual financial statements use the same terminology to describe building components as listed in your reserve fund study.
Once the draft reserve fund study has been presented to the condo board, it’s recommended that the board dedicate a board meeting entirely to reviewing the entire reserve fund study and creating a list of requested changes for the reserve fund study provider. Some examples of requested changes might be to move in what year some building components are repaired or replaced, or change the annual reserve fund contribution amounts so that they better align with the condo board's strategic plans for the condo.
Once your new reserve fund study has been approved by the board, don’t forget to create your reserve fund plan. The reserve fund plan is a separate document from the reserve fund study. It sets out the amounts needed to fund and maintain the reserve fund. Alberta condo legislation states that a reserve fund plan must provide sufficient funds to repair or replace the depreciated property in accordance with the reserve fund study. As outlined in our service agreement, Key Condo generates a first draft of the reserve fund plan for our condo board clients to review and approve.
Navigating the intricacies of reserve fund studies and ensuring compliance with Alberta's condominium legislation can be complex and time-consuming. At Key Condo, we understand the importance of proactive planning. If your condo board in Calgary is seeking expert guidance and support in conducting reserve fund studies, we're here to assist you every step of the way.
Great summarization Dana! 🙏