Restrictions on Condominium Bank Accounts? Here’s Our Take

According to Section 115(5) of the Condominium Act, condominium investments must either be:

  • issued or guaranteed by the government of Canada, or the government of any province of Canada; or
  • issued by an institution located in Ontario insured by the Canada Deposit Insurance Corporation (CDIC) or the Deposit Insurance Corporation of Ontario (DICO).

In this blog, I don’t plan to wade into the debate about whether or not each investment (if not government issued/guaranteed) must be CDIC or DICO insured (for instance, subject to the $100,000 CDIC protection limit). In my view, this debate will be settled if and when the second phase of the amendments to the Condominium Act arrive. At that point, section 115(5) will be amended to say that condominium investments must be either:

  • issued or guaranteed by the government of Canada, or the government of any province of Canada – no change to this wording; or
  • issued by an institution located in Ontario and…insured in accordance with the regulations by the Canada Deposit Insurance Corporation or the Deposit Insurance Corporation of Ontario – emphasis added to highlight the change in this wording.

So, if and when the next amendments to the Condominium Act arrive, I think it will be clear that condominium investments must be  CDIC/DICO protected (with applicable protection limits) if they are not government issued/guaranteed.

But what about the corporation’s regular operating and reserve fund bank accounts?

In our view, the above restrictions (that apply to “investments”) don’t apply to the condominium’s regular bank accounts. The requirements that apply to the regular bank accounts can be found in Section 115(3) of the Condominium Act, which reads as follows:

Each of the accounts shall be located in Ontario at a bank listed under Schedule I or II to the Bank Act (Canada), a trust corporation, a loan corporation or a credit union authorized by law to receive money on deposit. 

As long as the bank accounts meet the above test, in our view, there are no additional restrictions.

We think this makes sense for the following reason: Sometimes condominium corporations need to have more than $100,000 in either, or both, of their bank accounts in order to properly transact operating or reserve fund business (as the case may be).

So by way of summary: In our view, a condominium corporation’s regular bank accounts are not “investments” and the restrictions in Sections 115(5), (6) and (7) of the Condominium Act don’t apply to them.

Stay tuned to Condo Law News to keep up to date on the latest developments!

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