Condominium Reserve Fund Studies – Regulated Requirements (Nova Scotia)
This article outlines the statutory requirements for reserve fund studies in Nova Scotia, the content of the studies, and the process required to complete the assessment and report. The article includes the definition of terms used in reserve fund studies.
The complete Act and Regulations are available on-line at http://nslegislature.ca/legc/statutes/condo.htm and https://www.novascotia.ca/just/regulations/regs/conregs.htm#TOC2_10 , respectively.
The Condominium Act. R.S., c. 85, last revised 2011 by NS Bill No. 38, provides requirements for the declaration and registration of Condominiums in Nova Scotia, and provides the framework for Condominium Corporations to manage the ‘common elements’, ‘common expenses’ and ‘common interest’ of condominium ‘owners’ - all as defined in the Act.
Section 31 of the Act defines financial provisions for ‘common expenses and the Reserve Fund established by the corporation pursuant to subsection (1A)’. The Reserve Fund is described as follows:
(1A) The corporation shall establish and maintain a reserve fund for major repair and replacement of the common elements and assets of the corporation including, where applicable and without limiting the generality of the foregoing, roofs, exteriors of buildings, roads, sidewalks, sewers, heating, electrical and plumbing systems, elevators, laundry, recreational and parking facilities.
All condominium developments with ten units or more are required to have reserve fund studies in place. Existing condominiums of less than ten units are required to have reserve funds, but funding requirements are based on annual expenses and not on a reserve fund study. New condominiums of less than ten units are required to have a reserve fund study only if the development includes building conversion.
General requirements for updating reserve fund studies are included in the Act; more specific requirements are included in the Regulations.
Section 46 provides the framework for Regulations under the Act.
The Condominium Regulations, last revised April, 2013, include regulations regarding Reserve Fund Studies in Part K (Sections 77 to 81).
For condominiums with ten units or more, the Regulations currently require a comprehensive reserve fund study be carried out every ten years, and that updates to the study are made at five-year intervals or any time there is a significant change to the assets of the corporation. The evaluation period of the study is to be a minimum of 20 years.
For new condominiums required by the Act to file a reserve fund study, the Regulations include provisions for the assessment of deficiencies and funding by the developer . AAlso, if the study is required for less than ten units (i.e. to declare a conversion project), the assessment is limited to deficiencies and anticipated refurbishments over a minimum of ten years , and no further updates are required.
For phased developments, the Regulations stipulate that a study is required for the declaration of the phase which includes the tenth Unit. The study is to include all completed phases of the development. Also, a reserve fund study is required on the completion of each subsequent phase .
Process and Content
Comprehensive reserve fund studies include:
- An inventory of the Components of the Condominium’s Common Elements. The inventory is based on an on-site review; a review of the corporation’s architectural, electrical and mechanical plans; a review of the declaration and by-laws; a review of the corporation’s history with respect to the maintenance, replacement and repair of its components; and any planned changes to its components;
- An assessment of the remaining useful life, replacement cost, and the major maintenance and repairs related to each Component;
- A financial analysis of the Condominium’s reserve fund income and projected expenses, indicating the annual contribution required to be paid into the reserve fund to adequately offset expenditures for the major repair or replacement of the components.
Updates of reserve fund studies include:
- A site visit to update the component inventory and assessment of remaining useful life, replacement costs and major maintenance or repairs; and
- An update of the financial analysis.
In either case, the physical assessment is based on an on-site review of the major common area components, a review of drawings, previous inspection reports, complaints from occupants and maintenance records, and interviews with the property manager.
The update’s narrative may be brief and limited to variances from the comprehensive report; it may rely on the previous comprehensive report for description of the common elements and their condition, and may have to be read in conjunction with the full report.
The Regulations include the following definitions:
(a) “component” means an individual item that is included in the physical analysis portion of a reserve-fund study as described in subsection 79(2), and shall include an item
- that is the responsibility of the corporation,
- for which major repair or replacement costs are anticipated to be incurred during its useful life,
- for which the costs of repair or replacement will not be covered as part of the annual operating or maintenance budget;
(b) “master reserve-fund spread sheet” means a spread sheet with calculations of the annual funding requirements for each component based on its remaining useful life, the basic annual contribution and the shortfall contribution options, but without an allowance for inflation or interest earned;
(c) “projected cash flow tables” means tables that demonstrate the effect of interest earned on investments and inflation of expenses and validate that a shortfall option will not jeopardize the funding plan;
(d) “reserve-fund study” means a study undertaken to determine a funding plan that adequately offsets expenditures for major repair or replacement of components;
(e) “remaining useful life” means the estimated time, in years, that a component can be expected to continue to serve its intended function.
Condominium Documents – Drawings, Declaration and By-Laws
The documents filed with the Provincial Registrar of Condominiums which are most relevant to reserve fund studies include:
- Surveys and plans, which locate the physical boundaries of the property and each unit
- Architectural and engineering drawings: floor plans, building elevations, building sections and schematics which describe the materials and configuration of the structure, roof, exterior walls, partitions, finishes, fixtures and services
- The Declaration, which includes definition of the boundaries of each unit and, by exception, the definition of Common Elements as being all property except the units.
- The By-Laws include provisions for assessment and collection of contributions towards the common expenses. Typically, these By-Laws are either consistent with – or are superseded by - current Regulations.
 Condominium Act, Section 31 (1B)
 Condominium Act, Section 31 (1DA)
 Condominium Act, Section 31 (1F); Section 31 (1FC)
 “Significant change” is not defined. For comparison, “substantial change” is identified in the Act, Section 33(3), as 25% of appraised value.
 Regulations, Section 78B (1)
 Regulations, Section 78A
 Regulations, Section 77 (2)