When purchasing a condominium unit or a townhouse in a strata development, buyers quickly encounter two financial obligations that have no direct equivalent in freehold ownership: the monthly maintenance fee and the reserve fund contribution. Understanding how these amounts are calculated, what they cover, and what happens when they are insufficient is essential before signing any purchase agreement.
What Are Maintenance Fees?
Monthly maintenance fees — referred to as common expenses in Ontario, strata fees in British Columbia, and condo fees colloquially across the country — are the amounts each owner pays to the condominium corporation to fund its shared obligations. The fee is levied in proportion to each unit's share of the development, typically based on unit entitlement (BC) or proportionate share (Ontario), which is set out in the registered strata plan or declaration.
The annual budget prepared by the council determines the total amount required, which is then divided among all units according to their proportionate interest. A unit with a higher entitlement — usually one that is larger by square footage — pays a higher monthly fee than a smaller unit in the same development.
What the Fees Cover
Maintenance fees are allocated to two distinct funds: the operating fund and the reserve (or contingency) fund.
Operating Fund
The operating fund covers day-to-day expenses incurred by the corporation. These typically include:
- Property management fees
- Building insurance premiums (structure and common areas)
- Landscaping and snow removal
- Cleaning of common areas
- Elevator maintenance contracts
- Utilities for common areas (lighting, heating of hallways, parking, amenity spaces)
- Routine repairs and minor replacements
- Legal and accounting fees
- Security systems and concierge services (where applicable)
The operating fund is a rolling account — money comes in monthly and goes out regularly. A well-managed corporation maintains a small operating surplus as a buffer against unexpected expenses within the operating category.
Reserve Fund (Contingency Reserve Fund)
The reserve fund is designated for major capital expenditures — repairs and replacements of building components with a limited lifespan. Common examples include roof replacement, elevator modernization, window replacement, balcony membrane repairs, parking garage restoration, and boiler or HVAC system replacements. These are not routine maintenance expenses; they are significant, often expensive items that arise infrequently but predictably.
Provincial legislation requires that a portion of each monthly fee be allocated to the reserve fund. British Columbia's Strata Property Act stipulates a minimum contribution of 25 percent of the operating fund allocation unless a depreciation report justifies a different amount. Ontario's Condominium Act requires reserve fund studies at specified intervals to determine whether contributions are adequate. Alberta requires contributions as well, and its 2019 amendments strengthened reserve fund study requirements.
Depreciation Reports and Reserve Fund Studies
A depreciation report — known as a reserve fund study in Ontario and Alberta — is an assessment of a building's physical components, their estimated remaining lifespan, and the projected cost of their eventual repair or replacement. The report is prepared by a qualified professional and models several funding scenarios over a 30-year horizon.
In British Columbia, strata corporations with five or more lots must obtain a depreciation report every three years unless owners vote by a three-quarters majority to waive this requirement. The provincial government has been progressively reducing the ability to waive this requirement. In Ontario, reserve fund studies are mandatory for all corporations except those declared to be exempt (typically phased-in for new buildings).
For prospective buyers, the depreciation report is one of the most informative documents available. A report showing a reserve fund on track with projected expenditures suggests the corporation is well-managed. A report showing a significant shortfall — where the projected costs exceed current fund levels — indicates that fee increases or a special levy may be forthcoming.
Special Levies and Special Assessments
When a major repair arises and the reserve fund contains insufficient funds to cover it, the corporation has limited options. It can increase monthly fees over time (which addresses future contributions but not an immediate deficit), it can arrange financing through a corporation loan (available in some provinces), or it can pass a special levy.
A special levy is a one-time charge levied against all unit owners, typically in proportion to their unit entitlement. In British Columbia, most special levies require approval by a three-quarters vote at a general meeting. In Ontario, special assessments for reserve fund shortfalls can be authorized by the board without an owner vote in certain circumstances, though owners must be notified.
Special levies can range from a few hundred dollars for a minor repair to tens of thousands per unit for a major capital project such as a full roofing system replacement or underground parking restoration. The existence of a pending special levy, or a history of recent ones, is a signal worth investigating before purchasing.
Fee Increases and Budget Approval
The operating budget — and therefore the monthly fee — is approved annually at the AGM. Councils present a draft budget showing projected expenses for the coming year. Owners may ask questions and, in some provinces, vote on budget approval. If the budget is rejected, the previous year's budget continues in effect while the council revises its proposal.
Significant fee increases are sometimes unavoidable. Inflation affects contractor rates, insurance premiums have risen materially across Canada over the past several years, and aging buildings require more frequent maintenance. Buyers looking at older concrete or masonry buildings in particular should pay close attention to the reserve fund balance relative to the depreciation report's recommendations.
Questions to Ask Before Purchasing
Before completing a purchase, prospective buyers should obtain and review the following:
- The most recent financial statements (operating fund and reserve fund balances)
- The current year's approved budget
- The most recent depreciation report or reserve fund study
- Any approved but unfunded special levies
- The status certificate (Ontario), Form B (BC), or estoppel certificate (Alberta)
- Minutes from the last two or three AGMs for any discussion of upcoming capital projects
A real estate lawyer reviewing the status certificate or Form B is in a position to flag financial irregularities, undisclosed litigation, or abnormal patterns in the fee history. This review is standard practice in most real estate transactions involving strata properties and is an investment that often prevents costly surprises after closing.
Insurance Considerations
Building insurance held by the corporation covers the structure and common areas but typically does not cover the contents of individual units or improvements made by previous owners (betterments). Unit owners are responsible for obtaining their own contents and liability insurance, and in many cases, a policy that includes coverage for their proportionate share of any insurance deductible that the corporation assesses following a claim.
Insurance premiums for condominium corporations have increased substantially across many Canadian markets. These increases directly affect operating fund requirements and, consequently, monthly maintenance fees. Reviewing the corporation's insurance renewal history over the past three to five years provides useful context when evaluating the fee trajectory.