Investment Restrictions on Condominium Corporation Funds
Condominium managers play a critical role in ensuring that condominium corporations comply with investment restrictions under the Condominium Property Regulation (Schedule 2). Since investment decisions can significantly impact a corporation’s financial stability, condominium managers should recommend that boards consult a financial professional who is familiar with Schedule 2 investment rules to ensure compliance.
When investing their funds, condominium corporations are legally required to invest conservatively to protect unit owners’ financial interests. Investments must comply with restrictions set out in the Condominium Property Act and Condominium Property Regulation.
Key Restrictions on Reserve Fund Investments
Risk-Averse Investments: Condominium corporations must not engage in high-risk or speculative investments.
Permitted Investment Types: Funds can be invested only in low-risk, government-backed, or insured financial instruments.
Liquidity Requirements: Investments must allow the corporation to access funds when needed for repairs and maintenance.
Permitted Investments for Condominium Corporations
Condominium corporations may only invest in financial instruments that meet CPA requirements. Acceptable investment options typically include:
✔ Government Bonds – Secure, low-risk investments backed by the federal or provincial government.
✔ Guaranteed Investment Certificates (GICs) – Fixed-term investments that guarantee both principal and interest.
✔ Bank Deposits – Insured savings accounts that provide stability and easy access to funds.
✔ Permitted Common Share Investments – Under Schedule 2, condominium corporations may invest up to 15% of total funds in common shares of publicly traded corporations.
Evaluating Investment Decisions for Compliance
Step-by-Step Compliance Check
✔ Step 1: Review the Current Investment Portfolio
Are all funds in permitted investment types (e.g., GICs, bonds, insured deposits)?
Are funds easily accessible when needed?
✔ Step 2: Compare Investment Strategies Against CPA Guidelines
Are investments low-risk and stable?
Has the board avoided speculative investments?
✔ Step 3: Assess the Corporation’s Future Funding Needs
Will the investment generate enough interest while keeping funds available for repairs?
Are funds locked in for an appropriate duration?
Risks and Benefits of Investment Strategies
Low-Risk Investment Strategy (CPA-Compliant)
✔ Safe, stable growth over time.
✔ Protects principal amount from market fluctuations.
✔ Ensures liquidity for repairs and replacements.
High-Risk Investment Strategy (Non-Compliant)
❌ Potential for financial losses if investments decrease in value.
❌ Funds may be inaccessible when needed for emergency repairs.
❌ Could lead to legal non-compliance and financial penalties.
Case Study – Evaluating an Investment Strategy
Scenario: A condominium corporation’s reserve fund has been invested in a mix of GICs and corporate bonds issued by a private company.
Question: Does this investment strategy comply with the CPA?
✔ Yes – The GIC portion is secure and CPA-compliant.
❌ No – The private corporate bonds are a higher-risk investment that could violate CPA rules.
Recommended Action:
✔ The board should move funds into insured investments to comply with legal requirements and protect unit owners’ financial interests.
