I’ve recently learned that a condominium corporation in Saskatchewan has invested some of the corporation’s funds in the cryptocurrency known as Bitcoin. The corporation purchased 0.4 bitcoin at a price of $25,000, and according to media on the story, it intends to make continuing monthly investments.
In Alberta, such investments are regulated by the provisions in the Condominium Property Act, RSA 2000 c C-22 (the “Act”). Specifically, section 43 of the Act states that corporations may invest funds that are not immediately required only in accordance with the Regulations. The Regulations set out a closed list of “authorized” investments that include:
- government securities
- secured debentures
- other evidences of indebtedness
- first mortgages (with limitations)
- fully paid common shares of Canadian or American corporations (with limitations)
Generally, the types of investments that Alberta condominium corporations can make must be such that repayment of the principal is secured or otherwise guaranteed in some fashion. This would seem to preclude any investment in Bitcoin or other fluctuating stocks where there is real risk that the principal amount invested may be lost.
The current investment restrictions have not been substantially modified since 2006, so it will be interesting to see whether the Alberta Government decides to make amendments to expand the ability of condominium corporations to take advantage of other, riskier investment opportunities like Bitcoin.
Given that the funds “not immediately required” by condominium corporations are, generally speaking, monies held in the reserve fund for future repairs and replacements of capital property, I would not support a relaxation of the current investment requirements.
There is a good reason for why the underlying principal must be secured or guaranteed, and that is to ensure that the corporation is still able to meet its other statutory obligations. For example, section 38 of the Act deems the money in the reserve fund to be an asset of the corporation, and requires the corporation to maintain the fund at a level that is “reasonably sufficient” to provide for such future repairs and replacements.
Investments in currency like Bitcoin, or other stocks where the original principal investment is not guaranteed, would put the corporation at risk of violating these statutory provisions.
While I can’t comment on whether or not the Saskatchewan condominium’s investment is authorized by that province’s legislation, in my view, this type of investment is not, and should not be permitted in Alberta.
If you have any questions about the Service Alberta Statutes (Virtual Meetings) Amendment Act, SA 2021 c4, or other condominium-related issues, please comment below or contact one of the members of the Field Law Condominium Group.