- Contingency fund : Contingency fund survey
Definition : Contingency fund - Contingency fund survey
The exercise intended to estimate, in the short, mid and long term, the cost of work to proceed to major repairs of the common portions or their replacement. This survey is intended to establish precisely the amounts to be paid by the co-owners, for their common expenses, for the purpose of collecting annually the amounts required to be able to carry out such work.
The Contingency Fund is to be used strictly for major repairs and replacements of common portions. It should not be used to fund their maintenance.
An indispensable co-ownership document, the maintenance and management logbook is in essence a register tracing the building history, as well as a register of all the operations already carried out or forthcoming thereon. Even though not mandatory, it increases a co-ownership’s resale market attractiveness. In addition, the directors, by availing themselves of such a logbook, demonstrate their concern for good governance and sound management.
Co-ownership work is of the utmost importance. Yet, they are more often than not overlooked by the syndicates of co-owners. Work that needs to be done in common portions can be minor or major in scope. Yet one needs money to pay for them. Good financial planning is therefore advisable in the medium and long term, so that the community of co-owners can adequately protect its real estate investment.
Replacing windows, the roof or rehabilitating the underground parking slabs, to name just a few examples, is usually very expensive. Three options are available to the syndicate to pay for this work:
The contingency fund survey provides an overall picture of the forthcoming strategy, toward foreseeable major work in a co-ownership. It consists essentially of estimates and forecasts based on the previously discussed parameters. The survey does not indicate the cost and precise content of the work. These forecasts will eventually be confirmed or reversed at the time the plans, specifications and tenders have been completed.
The Contingency Fund study is an essential step in the sound management of an immovable held in co-ownership. You should be aware that the amounts paid into this fund are often insufficient, taking into account the amounts required for the necessary work to be carried out on the common portions of the immovable.
At least four out of ten syndicates of co-owners state, based on surveys, that they do not have enough money to finance this work. This number increases considerably in immovable built before the year 2000. To alleviate this situation, syndicates caught unprepared use special assessments.
I am a recent co-owner. The building I live in has 10 units. The contribution to contingency fund is substantial. In fact, it represents 20% of the budget of the co-ownership! That seems excessive.
Question: Is there a ceiling to the amounts to be paid in the contingency fund
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The law provides that a syndicate must keep a register at the disposal of the co-owners. In most cases the declarations of co-ownership list the items it contains. This register is the memory of the syndicate, and consequently, its archives. In is thus invaluable. Much more than a mere witness of the sound management of an immovable, it is its prime instrument. Therefore, preservation and access are the hallmarks of this register.