How a BC Strata May Invest Its Contingency Reserve Fund

A strata in New Westminster has $740,000 in its contingency reserve fund, earning next to nothing in a chequing account, waiting for a roof replacement projected for 2031. Over those years construction costs will rise several percent annually. The fund is not standing still; it is quietly shrinking against the thing it exists to buy.

A contingency reserve fund that is not invested is losing money every year. BC law is prescriptive about where that money may go, and within those limits there is a straightforward, low-effort strategy most councils never get around to.

This article is general information about the Strata Property Act and is not investment, tax or legal advice. Talk to your financial institution and, where the sums are significant, an accountant.

What the Act actually permits

The Strata Property Act restricts how a strata corporation may invest its money. The operating fund and contingency reserve fund can only be held or invested in the ways permitted by the Act and its regulations — which in practice means insured deposits and instruments at savings institutions, and government-backed securities.

That covers savings accounts, term deposits and guaranteed investment certificates at banks, trust companies and credit unions, along with government treasury instruments.

It does not cover equities, mutual funds, ETFs, corporate bonds, real property, private lending or anything a well-meaning owner with a finance background may propose at an AGM. This is not a matter of council preference; it is a statutory restriction, and a council that invests outside the permitted range has a serious problem regardless of how the investment performs.

The permitted range was broadened by regulation some years ago, so if your strata is relying on advice from a decade or more back, it is worth confirming the current position with your institution rather than assuming.

The BC deposit insurance point most councils miss

This one is genuinely valuable and almost nobody raises it.

Deposits at federally regulated banks are insured by the Canada Deposit Insurance Corporation up to a defined limit per depositor, per institution, per insurable category. A strata with several hundred thousand dollars in one bank account is insured only to that limit.

Deposits at British Columbia credit unions are protected by the Credit Union Deposit Insurance Corporation of British Columbia, and that protection is unlimited — there is no cap on the amount covered.

For a strata carrying a large reserve, this is not a technicality. It is the difference between a fully protected $740,000 and a partially protected one. It is also why so many BC stratas bank with credit unions, and why the question is worth asking explicitly at your next banking review.

If you prefer to stay with a bank, the alternative is to spread the reserve across institutions so that no single account exceeds the insured limit — more administration, same outcome.

Match the maturities to the depreciation report

This is the whole strategy, and it takes an hour once a year.

Your depreciation report projects which components need replacing and when. That schedule is also, read correctly, a cash flow forecast — it tells you when you will need money and roughly how much.

Build a GIC ladder against it. Money needed within a year stays liquid in a high-interest savings account. Money needed in two to three years goes into terms maturing then. Money not needed for five years goes into longer terms at better rates. Each maturity is reinvested or spent as the schedule dictates.

Three things this achieves at once: the reserve earns a real return instead of nothing, cash is available when the project actually starts, and nobody has to break a term early and forfeit interest.

The most common failure is the opposite — locking a large reserve into a five-year term and then discovering the parkade membrane cannot wait. Liquidity is a legitimate reason to accept a slightly lower rate. If your depreciation report is thin or dated, fix that first: BC strata depreciation reports and the 2026 deadline and how much should a BC strata's contingency fund be come before any investment decision.

Who decides, and how it should be recorded

Councils have authority to place the corporation's funds within the permitted investments, exercising the standard of care every council member is held to — acting honestly and in good faith with a view to the best interests of the corporation, and with the care and diligence of a reasonably prudent person. Check your own bylaws in case they add a requirement.

Do it properly:

• Minute the decision, including the amounts, terms, institution and the reasoning against the depreciation schedule
• Confirm the investment is within the permitted range and record that you checked
• Keep signing authority controlled — two signatures, and funds in the corporation's name. Where a licensed brokerage manages the money it is held in trust, and the reserve should be identifiable as the strata's, not pooled indistinguishably
• Never move reserve money into the operating fund to cover a shortfall. If the operating fund is short, that is a budget problem with its own remedies — see what happens when a BC strata goes over budget
• Report it in the financial statements so owners can see where the money sits and what it earns. How to read your strata's financial statements covers what should appear
• Review annually, as a standing agenda item near the fiscal year end

One point that catches people out: investing the reserve is not spending it. Moving money into a GIC is a treasury decision, not an expenditure, and does not need the owner vote that spending from the reserve requires. Withdrawing it to pay for a roof does.

The tax question

Interest earned on the reserve is income of the strata corporation, and it does have filing implications. Most residential stratas in BC have modest obligations here, but "modest" is not the same as "none," and the position differs for stratas with commercial components or significant investment income.

Do not guess. Does a BC strata corporation have to file a tax return sets out the general position, and an accountant is worth an hour of fees where the numbers are meaningful.

A worked way to think about it

Take a 46-unit building with a $500,000 reserve and a depreciation report showing an elevator modernisation in about three years and a roof in about eight.

Keep enough liquid for a genuine emergency — an amount council can defend, often the equivalent of a large deductible plus a contingency, in a high-interest savings account. Place a tranche in terms maturing around the elevator work. Place the remainder in longer terms maturing ahead of the roof. Reassess every year as the depreciation report is updated and as the project timing firms up.

Nothing clever is happening here, and that is the point. The gain comes from not leaving six figures in a chequing account for a decade.

It is also worth doing the arithmetic in front of owners once. On a $500,000 reserve, the difference between a negligible chequing rate and a laddered term structure is a meaningful annual sum — often the equivalent of a noticeable slice of one year's contribution, earned without anyone paying anything. Owners who have watched fees rise every year for a decade are receptive to a decision that puts money back into the fund rather than taking it out of their accounts, and the item takes five minutes at an AGM.

Shop the rates, too. Institutions quote differently for a strata corporation than for a retail customer, and asking two or three for a quote on the same term is an entirely ordinary thing to do.

What not to do

• Do not invest outside the permitted range, however persuasive the proposal or the projected return
• Do not lock everything long and leave the strata unable to respond to a failure
• Do not exceed deposit insurance limits at a single bank without a deliberate decision
• Do not let one person manage it informally. Two signatures, minuted decisions, statements to council
• Do not treat a strong investment return as a substitute for adequate contributions. The Act sets a minimum annual contribution, and a minimum is what it says it is. Investment income supplements funding; it does not replace it — see your depreciation report says you're underfunded, now what

Frequently asked questions

How can a BC strata invest its contingency reserve fund? Only in the ways permitted by the Strata Property Act and its regulations — broadly insured deposits and instruments at savings institutions such as savings accounts, term deposits and GICs, and government-backed securities. Equities, mutual funds and other market investments are not permitted.

Is a strata's money insured if it exceeds CDIC limits? At a federally regulated bank, coverage is capped per depositor, per institution, per category. Deposits at British Columbia credit unions are protected without limit by the Credit Union Deposit Insurance Corporation of BC, which is why many BC stratas with large reserves bank with credit unions.

Does a strata need an owner vote to invest reserve funds? Generally no. Placing funds in a permitted investment is a treasury decision within council's authority, exercised under the standard of care, and should be minuted. Spending money out of the contingency reserve fund is different and normally requires approval by owners at a general meeting.

Should a strata put its whole reserve into a GIC? No. Keep a liquid amount available for emergencies and near-term work, and ladder the rest so terms mature roughly when the depreciation report says the money is needed. Breaking a term early forfeits interest and is entirely avoidable.

Is interest earned on a strata's reserve taxable in BC? Interest is income of the strata corporation and carries filing implications. Most residential stratas have modest obligations, but the position differs where there is a commercial component or significant investment income, so take accounting advice rather than assuming.

Related reading

• How Much Should a BC Strata's Contingency Fund Be? (+ How to Estimate)
• New contingency reserve fund rules for BC stratas
• How to Read Your Strata's Financial Statements
• Strata Loan, Special Levy, or Higher Fees? How BC Stratas Fund Big Projects
• Does a BC Strata Corporation Have to File a Tax Return?

The investment restrictions sit in Part 6 of the Strata Property Act and its regulation, and BC credit union deposit protection is administered through the BC Financial Services Authority.

An hour a year against the depreciation schedule is the entire job. Onehive provides strata management and financial-only management across Metro Vancouver — request a proposal.