Was Your Condo Reserve Fund Study Prepared By A Qualified Professional?

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http://www.condoreporter.com/assets_c/2011/02/building%20through%20coloured%20glass-thumb-300x225-8222.jpgCan anyone do a Reserve Fund Study? Yes if you are a Strata Corporation in B.C. and no if you are a condominium corporation in Ontario.

A recent article in the Vancouver Sun highlighted one of the differences between Ontario condominiums and Strata Corporations. This is something that has raised concerns for many in the condo industry including one of B.C.'s interest groups, the Condominium Home Owners Association

In Ontario, only persons that fall within the prescribed class set out in the Condominium Act's regulations are permitted to do Reserve Fund Studies. Those persons must have a certain level of expertise and the regulations stipulate what designations or certifications are required. For example, persons holding a certificate to practice under the Architects Act, persons who hold a certificate of authorization within the meaning of the Professional Engineers Act and members of the Canadian Institute of Quantity Surveyors holding the designation of professional quantity surveyor fall within this prescribed class. The regulations also provide for instances in which a person is not qualified to carry out the Study, such as persons having any direct or indirect interest in a contract or transaction to which a director or officer of the corporation is a party, any spouse, son or daughter of a director or officer or a son or daughter of a spouse of a director or officer or any owner in the corporation.  It makes perfect sense that those individuals doing these studies should remain impartial and have no interest whatsoever in the outcome of the final reports.

However, this is not so in B.C.

By the end of 2013 most Strata Corporations will be required to prepare Depreciation Reports (B.C. term for Reserve Fund Studies) unless the owners vote to exempt themselves from this and it appears that anyone can conduct these reports, even the Corporation itself. 

This “do it yourself approach” sets a dangerous precedent by encouraging Corporations to look for the cheapest alternative and not get professionals to conduct these important reports.

Tony Gioventu of the Condominium Home Owners Association feels that this approach will be more costly in the long run. Owners obviously don't like to contribute now to items that will be required in the future, especially if they feel they will not be around to benefit from those repairs.

The expectation is that there will be more and more lawsuits when owners learn about extensive repairs with poor planning. In fact those law suits have already started and some consultants in B.C. are being sued for preparing negligent reports. 

Depreciation reports similar to Reserve Fund Studies are complex studies that require a  certain level of expertise.  Strata Corporations should only be using qualified individuals with the proper insurance in place. 

Getting these studies wrong can easily lead to ugly surprises when major repairs are required down the road that were never planned for, especially when owners are hit with large and unanticipated special assessments.

Topics:  Condominium Act, Condominium Associations, Condominium Corporation, Condominiums, Reserve Fund Study

Published In: Business Organization Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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