Bylaw-Consultants

To Fund or Not to Fund, You Need to Ask the Right Questions

By Gary Caouette

Funding Special Projects requires forethought, budget planning and an understanding of the Condominium Property Act so your corporation, your board and your unit owners do not find themselves, out of time, out of money, or outside of the condominium property act.

Who is responsible for the Special Projects that you fund?

Every condominium corporation must spend money on replacing or repairing corporation property. The responsibility to ensure that you have the funds necessary to do this, and to manage the completion of these projects, is the board of directors of your condominium corporation.

What kind of Special Project can you fund?

There are two very different kind of Capital projects that you can fund, and you must identify which one you have so you can follow the proper procedures to fund.

A capital repair or replacement project: repairing or replacing the real and personal property of the corporation, common property or managed property that currently exists. Be aware that you can not upgrade these items unless the old item is not available anymore or you need to get permission (a special resolution) from unit owners to do so.

A capital improvement project: adding something new to the real and personal property of the corporation, common property, or managed property.

In either case you will be required to follow specific procedures from the condominium property act, its regulations, and your corporation bylaws in order to pass your resolution.

What kind of Resolution do you require to fund your Project?

All Special projects will usually require a resolution to be passed in order to spend the corporation’s (unit owners) money.

A Board resolution (majority vote of the board) is normally required to fund a capital repair or replacement project.

A Corporation resolution (special resolution of unit owner’s) is normally required to approve a capital improvement project.

Refer to your specific bylaws in order confirm what is required as there may be some limitations or exceptions that are unique to your property.

How will you fund your Special Project?

The board may raise funds to complete a Special project through saving money in the reserve fund, accessing a special levy, or by borrowing the money.

Your reserve fund is set up to fund your capital repair or replacement projects. You need to use the information from your reserve fund study, to make a reserve fund plan, to build up your reserve fund. Expect the unexpected and plan for it.

You might want to look at making a separate contingency fund that you may use for what ever you need to do, given that all reserve funds have restrictions on what you can spend the money on.

If you do not have the money in your reserve fund, you can assess a special levy to raise the funds. Consult your bylaws on how and when you can levy a special assessment, but remember a special assessment can be a substantial financial burden on some unit owners.

You can minimize the financial burden by offering monthly payments instead of a lump sum payment if you are able to. You need to show that it is necessary to assess a special levy as there may be some situations in which owners can challenge your decision in court.

Condominium corporations can look at borrowing the money when you need to fund a Special project completed right away and you do not have time to save up, or do not want to use a special levy.

There are extra costs associated with borrowing money but in many situations the costs may be less then what you would pay if you waited years to save up the money as costs increase over time. There are a few lending institutions who specialize in this kind of borrowing and financial consultants who can assist your corporation through the process.

You may want to combine multiple sources of funding depending on what your unit owners would like to do or what they are able to do.

What ever solution you use to get your project funded, be sure to utilize every resource available to you. If you have a unit owner with relevant experience, use them. Some projects will require hiring a consultant, a project manager, or an engineer to oversee your project. The money you spend on these experienced professionals will ensure you get the most value for your dollar.