Guide
Reserve fund underfunded? Your options
When a condo reserve fund is short, a board has four ways to close the gap: raise contributions over time, levy a special assessment, borrow through a condo loan, or re-plan the work. Most boards use a mix. The right one depends on how big the gap is and how soon the money is needed.
First, confirm how big the gap is
Compare your actual balance and contributions with what the latest study recommends. If the study is old, or was written before construction costs rose sharply after 2020, the real gap may be larger than it looks. A reserve fund analysis or a new study gives the board a number it can act on. For a quick self-check, see the Alberta or Ontario health check, and There was a shortfall. What now?
The four options
Increase contributions
Raise the reserve portion of condo fees over several years so the fund catches up before the big projects arrive. It spreads the cost fairly across owners but only works if there is time before the work is due.
Special assessment (special levy)
A one-time charge to every owner to cover a shortfall. It raises money fast, but it lands on owners all at once, often with little warning, and shows up when units are sold.
Borrow (a condo loan)
The corporation borrows to fund the work now and repays it over time through contributions. It avoids a lump-sum hit to owners, at the cost of interest.
Re-plan the work
Some projects can be phased, and some estimates are out of date. An updated study or analysis re-tests timing and costs before the board commits to a levy or a loan. Deferring needed work only moves the cost, and usually raises it.
Owner approval rules differ by province and by bylaws. In British Columbia, for example, a special levy and borrowing each need a three-quarters vote. Check your province's rules before you plan.
Avoiding it next time
Underfunding rarely happens in one year. It builds when a study is not updated, contributions stay flat while costs rise, and projects drift. Keeping the plan current every year is what prevents it. Our Standard and Premium studies include myRPlanner for the full term so the board sees a shortfall coming years ahead. How myRPlanner helps prevent special assessments.
Common questions
What happens if a condo reserve fund is underfunded?
The money will not be there when major work is due, so the corporation has to raise contributions, levy a special assessment, borrow, or re-plan the work. The longer it goes unaddressed, the fewer options remain and the larger the eventual bill.
How do we know if our reserve fund is underfunded?
Compare the actual balance and contributions with what your most recent study recommends, and check whether the study is current. A study more than a few years old, or written before recent construction cost increases, may understate what is needed.
Is a condo loan better than a special assessment?
It depends on the size of the shortfall, how soon the work is due and what owners can absorb. A loan spreads the cost over time with interest; a special assessment collects it at once. Many boards use a mix.
Do owners have to vote on a special levy or a loan?
It depends on the province and the corporation’s bylaws. In British Columbia, for example, both a special levy and borrowing require a three-quarters vote of owners. Check your province’s rules and your bylaws before planning either.
How can we avoid this next time?
Keep the study current between cycles, update contributions every year against actual spending, and plan the big projects early. That is what myRPlanner, included with our Standard and Premium studies, is built for.
Find out where your reserve fund really stands
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