Canadian Lawyer

September 2021

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40 LEGAL REPORT REAL ESTATE realistic picture of what their contributions are likely going to be because it includes provisions for reserves and a study." Nova Scotia condo lawyer Devon Cassidy says that provincial regulation states a condo- minium with less than ten units does not need a reserve fund study. Still, it must have a reserve fund equal to a one-year operating budget. For those condos with more than ten units, an engineer must do an analysis and provide three options (a, b, and c, or as Cassidy says, "passable, nice and aspirational.") Cassidy, who is also the president of the board for the condo she lives in, notes that owners and operators of office or rental apartment buildings have a clear financial interest in ensuring the structural integrity of their assets. But condos are directed by unpaid individuals, most of whom have no technical knowledge, and some may not even live in the building. The speculative nature of the condo market — where investor owners could be looking for top margins at the lowest costs — adds another layer of complexity. "Sometimes I think that those who end up on condo boards don't understand what they've signed up for," Devon says. They are responsible for relatively large budgets and have a duty to work in the interests of the condominium owners. Yet, they are the neigh- bours of other owners who may think very for significant repairs. Still, it will take time in many cases because "if you tried to fund them properly right away through increased fees, most condo owners would go bankrupt." Alberta recently amended its laws governing condominiums, says Calgary-based lawyer Laurie Kiedrowski. In 2020, for example, the province placed more stringent rules on who is qualified to conduct reserve fund studies (for example, engineers and architects). An earlier rule change goes back to 2018, stating that developers must specifically set aside money for reserve funds and a reserve fund study in its initial budget. Developers typically determine and set the first-year budget until an owner-represented board of directors is elected. "Traditionally, a lot of the developers would provide budgets that didn't include monies for reserves or the reserve fund study," Kiedrowski says, which needs to be completed within two years of registration of the condominium plan in Alberta. Furthermore, there are provisions in the legislation saying that if a developer under- estimates the initial budget by more than 15 per cent, "they are obligated, under certain circumstances, to contribute to the condo- minium corporation to make them whole." Adds Kiedrowski, "So now, when they market the condo, buyers are getting a more Some jurisdictions such as Australia have passed legislation that aims to address ageing condos — either by redeveloping, demol- ishing or converting older buildings based on the approval of three-quarters of the owners. Recent regulatory changes have focused on "softer" rules such as director training and dispute resolution in Canada. There was no requirement for condos in Manitoba to even have a reserve fund study until Feb. 1, 2015. That's when new legis- lation came into place, giving boards three years to have one done. But Winnipeg lawyer Doug Forbes says that, so far, the majority of reserve funds he has seen are "grossly" underfunded, even with the new laws. "If you want to buy a condo, and you're looking for one with a reserve fund that is funded to the max, you are going to have a hard time finding one," he says. Forbes says that most responsible boards are moving towards reliable funding of their reserves TYPICAL CONDO BUDGET Source: Reserve fund: 25% Repairs: 10% Contracts: 20% Utilities: 40% Miscellaneous: 5%

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