Finances

November 30, 2024 Published by Huronia Chapter - By Jon Juffs

Managing Financial Chaos

From the CCI Huronia Fall 2024 Condo Buzz Newsletter

Insights from the CAO's Reserve Fund Survey on Rising Contributions and Condominium Stability The CAO Reserve Fund Survey provided essential insights into the state of reserve fund contributions and planning within Ontario's Condominium sector, highlighting both the commitment of many Corporations and areas needing greater attention and support.

Reserve Contributions and Budget Impact

The survey revealed that most standard Condominiums are contributing a substantial portion of their budget—often between 30% and 50%—to reserve funds, with nearly 63% contributing over $2,000 per voting unit annually. However, this has not insulated all from rising costs. Approximately two-thirds of surveyed Corporations recei ved recommendations to increase contributions by over 3%, a shift influenced heavily by inflation and the rising costs of labor, materials, and regulatory compliance​.

Rising Costs and Inflation Pressures

The impact of inflation has become a defining factor for reserve fund planning. Notably, inflation assumptions in reserve studies have increased, with many 2023 studies using inflation rates between 2% and 3%, higher than in previous years. Additionally, costs related to construction, measured by the Building Construction Price Index (BCPI), have consistently outpaced the Consumer Price Index (CPI), indicating that repair and maintenance costs are likely to continue rising at a steeper rate.

Funding Strategies: Special Assessments and Loans

Despite efforts to maintain regular contributions, many Condominiums have found it necessary to implement special assessments or loans to manage unforeseen or inflated costs. Between 2018 and 2023, 16% of Corporations issued special assessments, with an average cost per voting unit as high as $10,050 in some years. Although loans are less common, the data suggests an upward trend in these strategies, reflecting the financial strain that escalating costs place on reserve funds.

Owner Awareness and Engagement

One area of concern the survey highlighted was the gap in familiarity with reserve fund principles among Owners who are not currently or have never been Board Members. Only about 43% of non-director Owners reported familiarity with the CAO’s Guide on Reserve Funds, compared to 70% among those with Board experience. This disparity underscores the importance of broader educational outreach and communication to ensure Owners understand the purpose and necessity of reserve funds.

The Path Forward: Enhanced Support and Resources

In response to these findings, the CAO plans to bolster support for Condominium Corporations and Owners by expanding educational materials and engaging in ongoing data collection. This includes refining reserve fund guidelines to reflect economic conditions and promoting initiative-taking planning among all stakeholders, from Board Members to individual Owners.

Overall, the CAO Reserve Fund Survey underscores the importance of robust reserve fund planning and the challenges faced in the current economic climate. As reserve fund requirements grow in response to inflation and cost increases, it is crucial for all Condominium community members to prioritize effective communication, informed decision-making, and sustainable funding strategies to safeguard their communities’ futures.

Jon Juffs
EGIS