Reserve Fund Studies Practice Questions

Question 1 of 5

How should a buyer evaluate reserve fund adequacy?

• AThis is not governed by Ontario condominium legislation — ontario's condominium legislation directly addresses this topic
• BUnder Ontario's Condominium Act and related regulations, this is specifically addressed — the Act provides a comprehensive framework that real estate professionals must understand to advise clients on this aspect of condominium ownership and governance
• CThis only applies to condominiums with more than 100 units, under the financial planning requirements that govern how condominium corporations project future repair and replacement costs and set contribution levels accordingly
• DThere are no requirements or standards in this area, based on the reserve fund study provisions that establish planning horizons, contribution schedules, and investment strategies for long-term capital expenditure funding

Question 2 of 5

Broker Devi's client wants to understand the reserve fund study requirements under the updated Act. How often must reserve fund studies be conducted and what must they contain?

• AReserve fund studies are optional and conducted at the board's discretion, under the financial planning requirements that govern how condominium corporations project future repair and replacement costs and set contribution levels accordingly
• BReserve fund studies must be conducted every three years by qualified professionals; they must identify all major common element components, estimate their remaining useful life, project replacement costs, calculate the required annual reserve fund contributions, and provide a funding plan that ensures adequate reserves — the corporation must fund the reserve according to the study's recommendations
• CReserve fund studies are only required once, at the time of condominium registration, under the financial planning requirements that govern how condominium corporations project future repair and replacement costs and set contribution levels accordingly
• DThe condominium manager prepares the reserve fund study without professional involvement, based on the reserve fund study provisions that establish planning horizons, contribution schedules, and investment strategies for long-term capital expenditure funding

Question 3 of 5

Is a low common fee always a positive indicator?

• AThis is not governed by Ontario condominium legislation — ontario's condominium legislation directly addresses this topic
• BUnder Ontario's Condominium Act and related regulations, this is specifically addressed — the Act provides a comprehensive framework that real estate professionals must understand to advise clients on this aspect of condominium ownership and governance
• CThis only applies to condominiums with more than 100 units
• DThere are no requirements or standards in this area real estate

Question 4 of 5

Broker Chen's client is on the first owner-elected board after turnover. What are the board's immediate priorities?

• AThe board should immediately renovate common elements to the owners' preferences
• BThe board should: review the turnover audit findings and pursue any developer obligations, obtain independent legal advice on the corporation's rights against the developer, commission an updated reserve fund study, review all contracts and insurance policies, establish proper governance procedures, address any deferred maintenance identified during turnover, and ensure CMRAO-licensed management is in place
• CThe board has no authority until the developer confirms the transfer in writing, as the applicable regulatory framework and industry practices establish the standards and procedures that govern how this type of matter is addressed in Ontario real estate
• DThe board should immediately increase common fees by 25% to build reserves real estate

Question 5 of 5

A turnover audit reveals the developer charged below-cost common expenses during the initial period, creating a reserve fund deficit. What remedy is available?

• ACurrent owners must absorb the deficit through a special assessment, under the financial planning requirements that govern how condominium corporations project future repair and replacement costs and set contribution levels accordingly
• BOnly CMRAO can order repayment of the deficit, under the financial planning requirements that govern how condominium corporations project future repair and replacement costs and set contribution levels accordingly
• CThe reserve fund deficit is the condominium manager's responsibility; however, manager implements the budget but does not bear liability for developer-created deficits
• DThe corporation can pursue the developer for the deficit under the Act's turnover provisions — the developer had obligations to properly fund operations during the initial period, and artificially suppressed common expenses that create deficits may be recoverable from the developer