Warren Kleiner Partner Shibley Righton LLP
Sally Thompson Synergy Partners Consulting Ltd.
Ontario Condominium Act
Can I Pay for This From the Reserve Fund? (Reserve-Eligible Expenditures)
There are several sections of the legislation and regulations that help clarify what constitutes a reserve-eligible expenditure. Section 93 requires that reserve funds be used only for the major repair or replacement of the common elements and assets of the corporation. Section 97 addresses the Corporation’s ability to make additions, alterations or improvements to the common elements or changes to the as-
sets of the Corporation and sets out the procedure to be followed by the Corporation. This sounds simple but is actually quite complex due to complex nuances in the language of the legislation. Section 97 (1) says that if the corporation has the duty to repair after damage or to maintain the common elements (which includes the requirement to replace after normal wear and tear) and does so using materials “that are as reasonably close in quality to the original as is appropriate in accordance with current construction standards” then the work is deemed not to be an addition, alteration, improvement to the common elements or a change to the assets of the corporation (an “AAI”). Section 97 (1) provides clarity when a like-for-like replacement is not possible. For example, if you were repairing a plaster and lathe wall and did so using dry-
wall, that would be considered current construction standard. Or if you were replacing an atmospheric boiler, with a mid-efficiency boiler, that would also be considered current construction standard. Both can be paid from reserve provided they relate to the common elements. This is where things start to get a bit confusing. Section 97(2) indicates that the board may make an AAI without notice to the owners if the AAI is being made to comply with legislation, if, in the opinion of the board, the AAI is necessary to ensure safety and security, or if the cost, in any month is no more than the greater of $1,000 or 1% of the annual budgeted common expenses for the current fiscal year. It is important to note that this section tells a board that they can make an AAI without notifying the owners, but the work remains an AAI. As such, it is not clear that an AAI constitutes a major repair or replacement that may be paid for from the reserve fund. Many in the industry misinterpret this CONDOVOICE WINTER 2021
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ILLUSTRATION BY JASON SCHNEIDER
The board of directors of an Ontario condominium has the authority to pay for work using reserve funds without the consent of the unit owners. This feature of the Ontario Condominium Act recognizes that reserve fund expenditures are generally necessary for the upkeep of the common elements and should therefore not be subject to the whim of the owners. But, as we know, with great power comes great responsibility. It is important that boards only use reserve funds for expenditures which are reserve fund eligible.
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