A ListeningStick Dynamics Capital Reserve Study
A Capital Replacement Reserve Study is the first step in determining the monetary amount required to meet the obligation of “sufficiency”. A Capital Replacement Reserve Study provided by ListeningStick Dynamics will be written by a Certified Reserve Planner as designated by the Real Estate Institute of Canada and acknowledged as a qualified provider in Section 21.1 of the Alberta Condominium Regulations.
The study will be forward looking into the next 30 years and create cost estimates for the replacement or renewal of components identified. The study seeks to ensure that owners are not over contributing to the reserve while at the same time maintaining sufficiency to meet future requirements.
The report provided will be a financial study based on information gathered through a site visit and visual inspection of all identified components; a review of available plans; and an interview with your property manager and/or a board member. The estimates will be established through the use of a combination of quotes from local suppliers, historical repairs and RSMeans – Building Construction Costs. Projections for inflation and interest will included with the goal of ensuring there is a sufficient level of capital resource funding that meets the needs of the building while satisfying both the Board and shareholders.
Once completed, the condominium corporation will be provided with a guideline meeting the requirements of the Condominium Property Act.
Why Conduct a Capital Replacement Reserve Fund?
- Over time, many components of your condominium wear out or need refreshing. The reserve fund is mandated to ensure your corporation is collecting funds to pay for the future replacement or renewal of these items. The goal is to minimize the risk of undue hardship which can occur by requiring a special assessment or cash call as the project is often a large expenditure.
- The Capital Replacement Reserve Fund is maintained in a trust account and becomes an asset of the corporation. The funds may only be withdrawn for payments towards items identified in the Reserve Fund Study. Potential purchasers often review the study and annual reports to determine the adherence to the study and if it is properly funded.
- On January 1st, 2020 the Government of Alberta enacted amendments to the Condominium Property Act in reference to the Capital Replacement Reserve Fund. Section 38 of the Condominium Property Act identifies the requirement that the capital replacement reserve fund is to be established and maintained by the condominium corporation. Included in the amendments were the following important clarifications:
- Per Section 24 of the Regulations, a study, report and plan must be prepared no later than 2 years after the date on which the condominium plan was registered in compliance with Section 23 of the Regulations.
- Per Section 30 of the Regulations, on or before 5 years form the day the most recent reserve fund plan was approved, the corporation must, in accordance with the same procedures, requirements and restrictions to which Section 23 is subject.
- In addition, an annual report must be provided in compliance with Section 29(1) of the Regulations.
- Per Section 21(1) of the Regulations, clarity has been provided as to the professionals qualified to act as a reserve fund study provider.
Capital Reserve Annual Report
Section 29(1) of the Condominium Property Regulations requires an annual report be issued for each fiscal year. This report, at a minimum, must describe the capital repair and replacement work from the previous year, a financial update for the previous year and projections for income and expenditure in the current fiscal year.
This report is separate from your reserve study. With the support of the board and property manager, the ListeningStick team of professionals is able to provide this service for you in an easy to read presentation.
