Quick links
- BC Strata Housing: The contingency reserve fund
- Webinar video: Spending Money: CRF, Operating Fund, Special Levies
What is the contingency reserve fund?
The contingency reserve fund (CRF) is the fund that pays for expenses that occur less often than once each year. Examples are a new roof, replacement of hall carpeting, balcony repairs and paving a parking lot.
When is the CRF created?
Contributions to the CRF begin with the owner developer. Section 12 of the Strata Property Act says that at the time of the first conveyance of a strata lot to a purchaser, the owner developer must establish a contingency reserve fund. Regulation 3.01 sets the minimum contribution for section 12 as 10% of the estimated operating expenses.
The owner developer also determines the interim budget. Section 13 and Regulation 3.01 require the interim budget to include a contribution to the contingency reserve fund which must be at least 10% of the estimated operating expenses.
At the first annual general meeting, a council is elected and owners approve the first budget. Per section 93 of the Act and Regulation 3.4, this budget must include a contribution to the contingency reserve fund of at least 10% of the total amount budgeted for the contribution to the operating fund for the 12-month period covered by that budget.
What expenses can be paid from the CRF?
SPA s. 92 (b) says that a CRF is for common expenses that usually occur less often than once a year or that do not usually occur. SPA s. 96 and 158 provide additional details.
Do expenditures from the CRF need a majority or ¾ vote?
SPA s. 96 says expenditures from the CRF requires a ¾ vote with a few exceptions.
Only a majority vote (greater than 50%) is required for an expenditure from the CRF for the strata corporation to obtain certain reports:
- A depreciation report
- An electrical planning report
- Any other report respecting the installation or operation of EV charging infrastructure or the management of electricity used by EV charging infrastructure
Only a majority vote is required for an expenditure from the CRF:
- Related to the repair, maintenance or replacement recommended in the most current depreciation report for items the strata corporation is responsible for. Examples could be replacing a roof, renewal of the building envelope, paving the parking lot, new carpeting in the hallways, or replacing a boiler.
- Related to the installation of EV charging infrastructure or the management of electricity used by EV charging infrastructure
If an insurance deductible must be paid by the strata corporation to repair or replace damaged property, the strata council can decide whether to use money from the CRF or to pass a special levy. See SPA s. 158.
There are some other circumstances when a vote of the owners isn’t required. See spending money to learn about SPA s. 98 unapproved expenditures including emergencies.
How is accounting done for the CRF?
The CRF must be accounted for separately from other monies held by the strata corporation. Any interest or income earned on the money in the CRF becomes part of the fund. A best practice is to have separate bank accounts for the operating fund and CRF.
How much has to be contributed each year?
Part of your monthly strata fee is a contribution to the CRF. The amount is determined by the budget passed by a majority vote of the owners each year at the AGM.
Regulation 6.1 requires strata corporations and strata sections to contribute at least 10% of the value of the operating expenses set out in the budget to their CRF annually. 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.
The regulation requires strata corporations to contribute to their CRF annually regardless of how much is already in the CRF. It says “the amount of the annual contribution to the contingency reserve fund for a fiscal year…must be determined after consideration of the most recent depreciation report, if any, obtained under section 94 of the Act…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.” Most stratas find they must contribute more than 10% to build up their CRF.
There is no limit to how much money a strata corporation or section can contribute to their CRF.
Can the strata invest CRF money?
SPA s. 95 and Regulation 6.11 permit the strata to invest CRF money in certain types of investments including:
- Insured accounts with savings institutions in BC
- A savings or chequing account at a financial institution outside of BC if all or part of the funds are eligible to be insured by the Canada Deposit Insurance Corporation
- A term deposit or a guaranteed investment certificate (GIC) with a predetermined rate or rates of interest, if all or part of the deposit or certificate is eligible to be insured by the Canada Deposit Insurance Corporation or guaranteed by the Credit Union Deposit Insurance Corporation of British Columbia
- A treasury bill issued by the government of Canada
- Certain bonds and exchange-traded funds (see Regulation 6.11 for details)
Can money from the CRF be loaned to the operating fund?
See spending money to learn about loans from the CRF to the operating fund. The money can only be used to cover a temporary shortage in the operating fund. This means it can only be used to pay for an operating expense. The money must be paid back to the CRF by the end of that fiscal year.
Is a seller entitled to CRF money?
When a strata lot is sold, the seller is not entitled to any return of contributions to the CRF.
