Ontario condo reserve fund requirements, explained

Every Ontario condominium corporation is required to maintain a reserve fund. The rules around it aren't a matter of good practice — they're written directly into the Condominium Act, 1998, and a board that gets them wrong is exposed to real liability. Here's what the Act actually says.

The fund has one legal purpose

Section 93(1) requires every corporation to "establish and maintain one or more reserve funds." Section 93(2) is the part that matters most day to day: a reserve fund "shall be used solely for the purpose of major repair and replacement of the common elements and assets of the corporation."

That single sentence is why a reserve fund can't be quietly used to cover a rough month of operating expenses, and it's the whole legal reason Operating and Reserve money has to be tracked as genuinely separate funds rather than two labels on one account. We cover that separation in more detail here.

The 10% minimum, before a reserve fund study exists

A brand-new corporation doesn't start with a professionally calculated reserve contribution — that takes a reserve fund study, and the study itself takes time to arrange. So the Act sets a floor. Section 93(5) states that, unless a regulation says otherwise, until a corporation completes its first reserve fund study and implements a proposed plan under section 94, the total reserve fund contribution must be the greater of a calculated amount and 10% of the budgeted common expenses, excluding the reserve fund contribution itself.

In practical terms: for a new corporation still working from its first declared budget, at least 10% of every dollar collected for common expenses generally has to go into the reserve fund, not the 10-year-old rule of thumb some boards still quote informally — it's the actual statutory floor.

Contributions come in as part of common expenses

Section 93(4) is worth knowing because it explains why reserve contributions show up on the same dues invoice as everything else: "the corporation shall collect contributions to the reserve fund from the owners, as part of their contributions to the common expenses." Owners don't write two separate cheques — the corporation is the one responsible for splitting what comes in and keeping the reserve portion legally quarantined for its restricted purpose.

The first reserve fund study has a hard deadline

Section 94(1) requires a corporation to periodically study whether its reserve fund and contribution levels are actually adequate for the expected cost of major repairs. For a corporation created after section 94 came into force, section 94(4) sets a firm deadline: the first study must happen within the year following the registration of the corporation's declaration and description, and at prescribed intervals after that.

That one-year clock starts at registration, not at the corporation's first annual general meeting or its first full fiscal year — a detail that catches boards of newly-registered corporations off guard more often than it should.

What this looks like in practice

A corporation's monthly financial statements should always let a director answer three questions at a glance: how much is currently in the reserve fund, whether this month's contribution met the applicable minimum, and whether every withdrawal from that fund this year was genuinely for major repair or replacement rather than day-to-day operating costs. If those three answers aren't immediately visible in whatever system a corporation is using, that's the gap purpose-built condo bookkeeping software is meant to close.