Starting November 1, 2023 strata corporations and strata sections must contribute a minimum amount to their contingency reserve fund (CRF) annually. The amount of the annual contribution must be at least 10% of the total amount budgeted for operating expenses (the operating fund).
New Regulations
On January 24, 2023, British Columbia Order in Council OIC No. 32 amended the Strata Property Regulation regarding the minimum amount that owner developers, strata corporations, and strata sections must contribute to the contingency reserve fund (CRF).
Minimum contribution to the contingency reserve fund (CRF) by the owner developer
Sections 12 and 13 of the Strata Property Act require the owner developer to establish a contingency reserve fund, and include contributions in the interim budget. The percentages that determine the minimum amounts are now in Strata Property Regulation 3.01.
Highlights:
SPA 12 (1) At the time of the first conveyance of a strata lot to a purchaser, the owner developer must establish a contingency reserve fund by paying into the fund an amount calculated according to this section.
(2) If the first conveyance of a strata lot to a purchaser occurs no later than one year after the deposit of the strata plan, the minimum contribution to the fund must be the prescribed percentage of the estimated operating expenses as set out in the interim budget referred to in section 13.
The new Regulation 3.01 sets the prescribed percentage at 10%.
Similar changes were made to section 12 (3) (a); and section 13 (2) (b) which sets a prescribed percentage of 10% for contributions to the CRF in the interim budget (the budget before the first annual general meeting).
Minimum contribution to the contingency reserve fund (CRF) by strata corporations and sections
Previously the Regulations only required a strata corporation (or section) to keep their CRF at a minimum balance calculated as the value of 25% of the operating expenses in the most recent annual operating budget. For example, a strata corporation (or section) with operating expenses of $50,000 was only required to keep $12,500 in their CRF. There was no requirement to continue to contribute annually. Most strata owners realize that this amount is far too low to prepare for upcoming repair and renewal projects.
Highlights:
Strata Property regulation 3.4 and regulation 6.1 now require strata corporations (and sections) to contribute to their CRF annually regardless of how much is already in the CRF. They must contribute at least 10% of the value of the operating expenses set out in the budget. For example, a strata corporation (or section) with operating expenses of $50,000 would have to contribute a minimum of $5,000 to the CRF. If operating expenses go up to $65,000 next year, the minimum contribution next year would be $6,500 and so on every year. There is no maximum.
These Regulations become effective November 1, 2023. If your strata corporation or strata section’s annual general meeting (AGM) will be held on or after November 1, 2023, the budget approved at the meeting must include a contribution to the CRF of at least 10% of the value of the operating expenses.
The details
Section 93 of the Strata Property Act “Minimum and maximum contributions to contingency reserve fund” says “Subject to the requirements set out in the regulations, the strata corporation must determine the amount of the annual contribution to the contingency reserve fund.”
Regulations effective November 1, 2023:
Contingency reserve fund contribution in first annual budget
Regulation 3.4
For the purposes of section 93 of the Act, the amount of the annual contribution to the contingency reserve fund for the fiscal year following the first annual general meeting must be at least 10% of the total amount budgeted for the contribution to the operating fund for the 12-month period covered by that budget.
Contributions to contingency reserve fund
Regulation 6.1
(1) For the purposes of section 93 of the Act, the amount of the annual contribution to the contingency reserve fund for a fiscal year, other than the fiscal year following the first annual general meeting, must be determined after consideration of the most recent depreciation report, if any, obtained under section 94 of the Act.
(2) The amount of the annual contribution must be at least 10% of the total amount budgeted for the contribution to the operating fund for the current fiscal year.
Note: The operating fund is the portion of the budget for operating expenses.