Are Your Condo Funds Being Misused?
Owners, it’s time to face an uncomfortable truth: the reserve fund is not a piggy bank. It is protected by law. If the board has dipped into it for anything other than major repairs and replacements, they are not just mismanaging your money – they may be breaking the law.
đź“ś What the Law Says – Section 93(2)
Section 93(2) of the Ontario Condominium Act, 1998 is crystal clear:
“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’s it.
- No “temporary loans.”
- No “we’ll pay it back later.”
- No covering operating deficits.
- No funding lawyers’ fees or litigation losses.
Any other use is unauthorized.
đź’¸ Why This Matters
The reserve fund is your financial safety net – it protects your property value and ensures that major repairs don’t result in crushing special assessments.
When boards “borrow” from the reserve:
- Future projects risk being underfunded.
- Reserve studies become meaningless.
- Owners face higher fees and special assessments sooner.
⚖️ Legal and Regulatory Guidance
The Condominium Authority of Ontario (CAO) states :
“Directors may be tempted to borrow from the reserve fund to cover operating deficits. This misuse of the reserve funds is expressly prohibited by section 93(2)… one cannot use the reserve fund as a loan even if it is to the operating fund.”
(CAO Condo Finances Guide, 2023) page 19
Shibley Righton LLP, the law firm the board hired to “chair” our last owner-requisitioned meeting, warns:
“Reserve monies cannot be used or borrowed from the Reserve Fund for operating expenses. Only the replacement and major repair of capital items are permitted.”
(Shibley Righton, Reserve Funds 101)
🔍 Case Example: Middlesex Condo Corporation
In Middlesex Condo Corp. No. 232, the board tried to solve a $612,000 shortfall by introducing a borrowing by-law. Owners demanded transparency, and when the board attempted to bypass accountability, litigation followed and the directors faced personal liability.
(RCLLP: Board Members Behaving Badly)
Lesson: Borrowing without proper owner consultation and approval doesn’t just risk legality – it risks directors’ wallets too.
🚨 Red Flags Owners Should Watch For
- Reserve funds used to pay legal bills or operating costs.
- No disclosure of inter-fund “borrowing” in audited statements.
- Sudden special assessments despite a “healthy” reserve.
- Missing or incomplete reserve studies.
⚠️ Bottom Line
Section 93(2) gives the board zero room to raid the reserve fund.
If they’ve done it (and they have), they’ve crossed a legal line – and owners have the right to hold them accountable.
Silence costs your money. Oversight protects it.
