For condo owners, and prospective buyers, knowing that a fund is in place to cover large, expected repairs and replacement costs to the building’s common areas can provide financial peace of mind.
But with construction costs on the rise over the last few years, some of these required renovations may now be priced higher than originally estimated, leaving some condo owners with increases to their monthly fees or even surprise repair bills, costs that are generally not covered by standard condo insurance policies.
If a reserve fund is underfunded, common expenses can increase, a special assessment could be implemented, money may be borrowed, or maintenance can be deferred. A funding deficiency generally isn’t an insured loss.
Our editorial team reviewed the Condominium Authority of Ontario’s reserve-fund survey, CAO’s reserve-fund guide, CAO’s status-certificate guide, and the Insurance Bureau of Canada’s home and condo coverage guide to learn more.
Does Condo Insurance Cover a Reserve Fund Shortfall?
Loss-assessment coverage may apply where the fee was levied following a liability or common-property loss that the corporation insured. Whether the assessment is covered depends on the policy wording, what gave rise to the assessment, and the deductibles and limits.
Assessments are usually not covered where they relate to an improvement, increased construction costs, lack of timely maintenance, or where the corporation didn’t charge owners sufficient fees regularly.
The key is to ask the corporation why the assessment is needed, then compare it with what’s described in your policy and the corporation’s insurance policy. The term “assessment” doesn’t tell you much.
What Is a Reserve Fund, and Why Do Condo Owners Depend on It?
In every province, condo corporations have to maintain at least one reserve fund (sometimes called contingency reserve funds) to cover major repair or replacement of the building’s common elements, such as the roof, parking garage, elevators, pipes, HVAC system and amenities.
As the Condominium Authority of Ontario notes, the reserve fund can’t be used for upgrades and alterations.
Part of condo owners’ monthly fees — or their payment towards the common expenses — is contributed to the reserve fund.
To make sure the reserve fund is healthy, condos are required to carry out reserve fund studies, which estimate the cost of the repairs and replacements and their expected life span in order to make a 30-year plan, and update these at least every three or five years, depending on the province.
Why Construction Inflation Changed the Math
With construction costs rising in recent years, today’s repair costs may no longer align with forecasts set out a few years ago.
Since the pandemic, materials and labour costs have soared and while they have come down off their peak, they are still growing faster than overall inflation.
From Q1 2020 to Q1 2026, StatsCan’s Residential Renovation Price Index, which measures the average price of eight residential project types, rose more than 56%.
Statistics Canada’s Building Construction Price Index (BCPI) rose 4.1% year-over-year in Q4 2025, led by metal fabrications, structural steel framing, concrete and plumbing.
Back in 2021, just over half of reserve fund studies used assumed forward-looking inflation rates between 1% and 2%, while 30% used rates between 2% and 3%, according to the Condominium Authority of Ontario’s report on reserve fund survey findings, released in fall 2024.
This did start to change in 2022 and 2023, with:
- More than 35% of reserve fund studies using inflation rate assumptions of between 2% and 3%.
- The number of studies assuming rates between 3% and 6% also increasing compared with 2021.
Nearly two-thirds of condo corporations also received recommendations to increase their reserve fund contributions by more than 3%.
Indeed, in a 2023 article, the Association of Condominium Managers of Ontario cautioned that reserve fund study updates will have to reflect the significant increase in costs, “even for those projects that are in the distant future,” via contribution increases and, in some cases, special assessments for those with substantial projects that can’t be deferred in the near term.
In one recent example, CBC reported that a London, Ont. condo owner’s monthly fees went up more than 35% in a year after the reserve study was updated. A $5,000 special assessment was also issued to each owner to replenish the condo’s reserve fund.
What Is a Special Assessment?
As the Condominium Authority of Ontario notes, special assessments are one-time, mandatory fees that can be added to a condo owner’s common expense fees to cover budget shortfalls.
Your condo corporation decides how much you’ll have to pay, with each owner’s portion calculated using the same percentage used to calculate the common expenses fee.Read More: See How Condo Loss Assessment Coverage Works
What Unit Insurance Does Not Cover
| Reason for the assessment | Possible unit-policy response | What to verify |
|---|---|---|
| Low contributions, maintenance, wear or reserve shortfall | Normally no | This would be considered funding or maintenance rather than an insurable loss. |
| Insured common-property loss exceeds the corporation’s available insurance | Loss-assessment coverage may help | Causes of claims; corporation settlements; units; coverage limit; deductible; coverage exclusions |
| Corporation deductible is charged to the unit owner | Deductible-assessment coverage may help | Chargeback authority, cause of loss, responsibility and unit limit |
| Owner is liable for damage to common property | Liability or deductible coverage may help | Facts and declarations; allegation of negligence; policy exclusions; insurer’s consent |
Read More: Read How Condo Fire Insurance Works
What a Condo Buyer Should Review
In Ontario, condominiums can charge up to $100 for a status certificate. The corporation should provide a status certificate within 10 days of receiving a complete request and full payment.
Review the current budget, audited financial statements, most recent reserve-fund study and the board’s future-funding plan. Look for fee increases, special assessments, condominium borrowing, deferred maintenance items, pending litigation and changes in insurance. Compare the current reserve-fund balance and contributions against the reserve-study timeline and immediate projects.
Have a condo lawyer review the status certificate, condo declaration and any material exceptions well before your conditions expire.
Read More: Read the Ontario Condo Fees Guide
What an Existing Owner Can Do
Review your condo board notices and periodic information certificates to ensure contributions are being made as outlined and projects are completed according to plan.
If a major project changes, ask why and insist on engineering or cost justifications.
Review your own unit’s insurance policy to identify your deductible, assessment and loss-assessment limits and any sublimits for each peril. Identify gaps before the next assessment. Have a liquid reserve to pay assessments not covered by insurance.
Read More: Use the Canadian Townhouse Insurance Guide