As the long-term financial health of condominiums remains an ongoing concern across Ontario, the Condominium Authority of Ontario has released preliminary findings on the state of reserve funds and owners’ awareness.

This follows the Auditor General’s 2020 value-for-money audit on condominium oversight, which found the majority of condos surveyed didn’t have adequate reserve funds to pay for future repairs and replacements.

Respondents to two surveys the CAO conducted in April and May 2023 included 5,986 condo owners (87 per cent were current or former directors) and 724 condo corporations.

There were some noteworthy limitations of the initial data, such as the sample size and representation among corporations (there are currently more than 11,000 condominium corporations across Ontario), abnormally high inflation rates at the time of the survey, and the complexities of reporting this data, yet the CAO says its findings affirm the need for enhanced owner education and support for directors.

“The results show that greater awareness of key reserve fund concepts is needed within the condo sector to facilitate better planning and collaboration within the condo community to identify and implement strategies for maintaining an adequate reserve fund as required under the Condo Act,” the report states.

From the owners who were polled, less than half of non-director owner respondents report familiarity with the Condominium Authority of Ontario’s (CAO) in-depth guide on reserve funds, which outlines best practices for managing them.

Going forward, there are plans to collect more robust data for in-depth and more accurate insights. As it stands now, the provincial regulator found that forward-looking inflation rates used for reserve fund study projections appear to have increased since 2021. Nearly two-thirds of corporations were told to increase their reserve fund contributions by more than 3 per cent.

Meanwhile, most corporations reported adhering to recommendations for annual reserve fund contributions. An estimated 79 per cent said their budgeted contributions would meet or exceed the recommended reserve fund contributions for their current fiscal year at the time of the survey.

The CAO also found that two-thirds of corporations contributed more than 30 per cent of their total budget to the reserve fund in 2023. As well, 63 per cent contributed more than $2,000 per voting unit to the reserve fund last year. The report also points out that rising construction costs over the last three years may be triggering more special assessments and loans used to adequately fund the reserve fund. Although, more data and clarification is needed on this front.

Looking at common expense fees, of the corporations who reported on their percentage increases per year, including both operating and reserve fund contributions, more than 80 per cent said their fees rose by less than 10 per cent for 2021, 2022, and 2023. A small upward trend was noted after other corporations reported a 10 t0 20 per cent increase during this same period.

“The reasons for these increases and their proportions contributed to reserve funds are unclear,” the report adds. “The exact proportion of increases in common expenses fees related to reserve fund contributions will be collected in future research.”

Turning to owners, more than 90 per cent of respondents who were non-directors reported being very, somewhat or slightly familiar with the reserve fund compared to all owners who were former or current directors. Yet, as noted above, they were not as aware of key reserve fund notices and the CAO’s resources on the topic.

There are plans to enhance the CAO’s existing materials and add new resources to further awareness of the importance of maintaining a healthy reserve fund.

In the past, many corporations have felt a disconnect between owners and boards. While its director training programs are only mandatory for directors, the CAO suggests owners also become aware of and complete the foundations director training course to better understand the responsibilities of the board that governs their condominium.

Most respondents in this survey who never served on a condo board reported being very, somewhat, or slightly familiar with such training, but fewer (45 per cent) were aware of the advanced training course, as well as the reserve fund guide. Those who were or are current directors obviously reported much more familiarity. Yet the CAO says it hopes to better reach condo owners directly and promote its reserve fund materials and concepts.

Compiled in consultation with industry experts, this report is being viewed as a preliminary step towards identifying more opportunities and clarifying issues with more thorough data.