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CONDOCENTRIC: Reserve Fund Studies - 120 Days From When!?
This is an excerpt from an article by Ben Rutherford from our Fall 2003 Newsletter regarding certain timing considerations with respect to Reserve Fund Studies. It is being reproduced given that the focus in this issue is new condominium corporations.
At the out-set, under subsection 94(4) of the Condominium Act, 1998 (Ontario) (the "Act"), a Corporation must conduct a reserve fund study within the year following registration of the declaration and description. With this is mind, an approach is often to have the same engineering firm conducting the performance audit report ("PAR") then conduct the reserve fund study since they should be already intimately familiar with the Corporation. Accordingly, enough time must be allowed to undertake the reserve fund study after the confirmation for near completion of the PAR and for the board to review the reserve fund study and have any necessary revisions made thereto.
Subsection 94(8) of the Act states that within 120 days of receiving a reserve fund study, the board shall propose a future funding plan for the reserve fund that meets prescribed thresholds. Since the new Act came into force, we often receive what initially seems to be a simple question but which, on further consideration, fails to have a simple answer.
When does the 120 days given to a Board under section 94(8) to propose a plan for the future funding of the reserve fund start to run? Is it triggered when the Board receives the first draft? What if the board is not satisfied with it and sends it back for further work? Has the 120 days been triggered? It's a very good question. ??As should be evident, if the Reserve Fund Study (the "Study") comes back to the board absent information that the Board considers necessary, even if the missing information is not specifically listed in the Regulations governing the content and method of Study, the Study is not complete, and so the 120 days is arguably not triggered. The Regulations provide for the eventuality that the Board may require more information than what is specifically mandated.
But what if the Study stipulates an unnecessarily high replacement value for a certain item? What if the Study stipulates a replacement value of carpet that Board feels is too high, or too low? ??The Act created the requirement of a Study to remedy the mischief caused when a condominium corporation has an underfunded reserve fund by establishing a basis on which a reserve fund plan should be created. It would defeat the purposes of the Act if the Board were required to propose a funding plan within 120 days of a having a draft Study delivered that met the formal requirements of the Regulations but did not provide a realistic basis upon which to propose a funding plan.
The 120 days is arguably triggered when the board "receives" a Reserve Fund Study. "Receipt" of a Study, however should be an ongoing process, with the Board conducting an ongoing evaluation of the findings of the entity performing the study. The Board should ensure that they "receive" a study which, at a minimal, assesses the particular needs of their condominium corporation. Accordingly, the 120 days should arguably begin to run when the Board has something that it is confident accurately reflects the needs of the condominium corporation, which is when it formally decides by resolution to adopt the study as final.
From “Common Elements” Winter/Spring 2004
All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.
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