The contingency reserve fund (CRF) in strata corporations

Every strata corporation and section must have contingency reserve funds (CRFs) to pay for common expenses that usually occur less often than once a year; or which do not usually occur.

Effective November 1, 2023, strata corporations and sections are required to annually contribute a minimum of 10% of the annual operating fund to the CRF.

Learn more on this page:
Purpose of the CRF
Minimum annual contributions to the CRF
Contributions to the CRF and the depreciation report
The CRF and electric vehicle charging
Sections and the CRF
Claims to monies in the CRF
Expenditures from the CRF
Investing and managing the CRF

Purpose of the CRF

Under the Strata Property Act, every strata corporation and section, must have a contingency reserve fund (CRF). The CRF helps to pay for expenses that occur less than once a year, or that do not usually occur. Examples of CRF expenses include: replacing the roof, upgrading the elevator or repaving a road. The CRF can also be used to pay for the depreciation report and the electrical planning report.

Contingency reserve fund expenditures are usually identified in advance by a depreciation report and must be approved by owners, unless it is for emergency repairs or insurance deductibles that are a common expense.

Contributions to the CRF are approved in the annual budget by a majority vote of owners. CRF contributions are collected through strata fees, which are based on unit entitlement. Contributions to the CRF are not refundable to owners.

Other funds may also be added to the CRF including: surplus funds from the previous year's operating fund; surplus funds from a special levy (as long as the surplus funds owing to each strata lot is $100 or less); or sale of assets.

Minimum annual contributions to the CRF

Effective November 1, 2023, when approving budgets at the annual general meeting, strata corporations and sections are legally required to annually contribute a minimum of 10% of the total amount budgeted to the annual operating fund to the contingency reserve fund (CRF).

Most strata corporations are already contributing more than this legal minimum to the CRF, in order to have funds available to pay for longer-term repair, replacement and maintenance costs.

Contributions to the CRF are approved in the annual budget by a majority vote of the owners and collected through the strata fees. Usually the contributions to the CRF appear as a single expense line in the budget.

For new strata corporations, owner developers must also contribute to the contingency reserve fund (CRF). Effective November 1, 2023, the owner developer must contribute more to the contingency reserve fund. The owner developer must now contribute the lesser of (a) 10% of the estimated operating expenses multiplied by the number of years since the strata plan was deposited, or, (b) 50% of the estimated operating expenses. These amounts were increased from 5% and 25% respectively.

Contributions to the CRF and the depreciation report

Contributions to the CRF should be made with consideration of the depreciation report. The depreciation report provides information about the longer-term repair, maintenance and replacements costs for the strata corporation or section.

The CRF and electric vehicle charging

On May 11, 2023, Bill 22 – Strata Property Amendment Act made changes to the Strata Property Act to lower the voting threshold from ¾ to majority for strata owners to approve CRF spending that is:

1)  related to the installation of electric vehicle (EV) charging infrastructure or the management of electricity used by EV charging infrastructure, or

2)  necessary to obtain a report respecting the installation or operation of EV charging infrastructure or the management of electricity used by EV charging infrastructure.

As of December 6, 2023, new regulations, the Electric Vehicle Charging and Electrical Management Regulation require strata corporations with five or more lots to obtain an electrical planning report. Electrical planning reports help strata corporations to understand their current electrical capacity and their ability to meet new demands for electricity, including charging electric vehicles and other future needs such as heat pumps and cooling. Learn more about electrical planning reports and electrical vehicle charging in strata corporations.

Sections  and the CRF

Under Part 11 of the Strata Property Act, strata lots can be organized into formal groups, which are called sections.

• A section represents the interests of the strata lot owners in the section.
• Each section operates independently from other sections in the strata corporation with respect to matters that relate solely to the section. For example, a commercial section with a restaurant may have some interests which are different from a residential section.

Each section within a strata corporation must establish its own operating fund for common expenses that relate exclusively to the section and a CRF for expenses that relate exclusively to the section. The owners of the strata lots in the section pass an annual budget for their section. Usually the contribution to the section's CRF appears as a single item in the section's operating budget. Section strata fees are usually based on the unit entitlement of the section strata lots.

Contributions to the separate section operating fund and the CRF are approved in the separate section annual budget and collected through separate section strata fees.

Strata lot owners in a section will also contribute to a strata corporation budget and strata corporation CRF for expenses common to strata lots in all sections, or expenses that are shared by more than section. (Common expenses shared by different sections cannot be included in separate section budgets, these expenses must be included in the strata corporation budget as a common strata corporation expense).

Strata lots that are differentiated as different types of strata lots in a bylaw do not have the power to establish their own operating fund, CRF and bylaws in the way that sections do.

Claims  to monies in the CRF

When the sale of a strata lot occurs, the seller is not entitled to a return of contributions to the CRF.

Expenditures  from the CRF

The CRF is used to pay for expenses that occur less often than once a year or that do not usually occur. 

Expenditures from the CRF must be:

• consistent with the purpose of the CRF
• can be approved by a majority vote if:
  • the expenditure is necessary to obtain a depreciation report or
  • the expenditure is related to the repair, maintenance or replacement---as recommended by a depreciation report---of common property, common assets or portions of a strata lot for which the strata corporation has taken responsibility by bylaw 
  • the expenditure is related to the installation of electric vehicle (EV) charging infrastructure or the management of electricity used by EV charging infrastructure, or is necessary to obtain a report respecting the installation of electricity used by EV charging infrastructure such as the requirement for strata corporations with five or more units to obtain an electrical planning report.
• a 3/4 vote is required in almost all other cases.

An expenditure from the CRF without an owners' vote of approval is only permitted if:

• the expenditure is necessary to ensure safety or prevent significant loss or damage and
• the expenditure does not exceed what is required to ensure safety or prevent loss or damage or
• the expenditure is for the purpose of paying an insurance deductible required to repair or replace damaged property

If an unapproved expenditure occurs the strata council must inform owners as soon as possible about the expenditure unless the expenditure was to pay for an insurance deductible.

Investing  and managing the CRF

The CRF can be invested or held:

• in insured accounts with savings institutions in British Columbia
• in those investments permitted by Strata Property Regulation 6.11.

The CRF must be accounted for separately from other monies held by the strata corporation or separate section and must include any interest or income earned on the CRF.

The CRF can be used to secure a strata corporation loan by approval with a 3/4 vote.

Funds from the CRF can also be loaned to the operating fund to cover temporary shortfalls. The money must be repaid to the CRF by the end of that fiscal year and the strata council must inform owners as soon as feasible of the amount and purpose of the loan.

• For example, a strata corporation receives a larger than anticipated bill for insurance early in their fiscal year and after the budget was approved. As there is not enough cash in the operating bank account, the strata council votes to approve a temporary loan of $10,000 from the CRF to pay the insurance bill. The council then decides to pay the money back to the CRF in installments of $2,000 per month for the next five months. The strata council informs owners via the strata council minutes.

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References:
Strata Property Act Sections: 12-13, 92-96 and 98
Strata Property Regulation: 3.01, 3.4, 6.1, 6.2, 6.3 and 6.11

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