Definition : Contingency fund - Contingency fund study

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. This document is an integral part of the register of co-ownership and shall be made available to any co-owner upon request.

WHAT YOU SHOULD KNOW! The contingency funds study will be mandatory as of the day following the first three years of entry into force of the Government of Québec's regulation on the subject. If it is adopted in 2021 as planned, the documents will therefore be required from 2024.

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Le carnet d'entretien contient notamment l'historique des travaux réalisés dans un immeuble. Ainsi, les administrateurs nouvellement élus sauront ce que leurs prédécesseurs ont fait.
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L'étude du fonds de prévoyance et le carnet d'entretien deviendront éventuellement obligatoires, en vertu de l'adoption du projet de loi 16, en décembre 2019. Les syndicats de copropriétaires pourront, ainsi, mieux planifier les travaux majeurs à faire dans leur immeuble, ainsi que le remplacement des parties communes.
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Le fonds de prévoyance est le "bas de laine" d'une copropriété. Il sera indispensable lorsque viendra le temps d'engager des travaux majeurs dans l'immeuble, ou qu'il faudra remplacer des parties communes arrivées à échéance.
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Le carnet d'entretien est indispensable pout tout syndicat de copropriétaires, afin d'assurer la pérennité de son patrimoine bâti.
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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.
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Every syndicate of co-owners has obligations regarding common portions maintenance. Article 1039 of the Civil Code of Québec provides that the object of the syndicate is the conservation of the immovable, the maintenance and the administration of the common portions. However, this section was amended following the adoption of Bill 16. At the end of the first paragraph, referring to the syndicate of co-ownership, it reads the following sentence: "The legal person must, in particular, see to it that the work necessary for the preservation and maintenance of the immovable is carried out." This duty to preserve the immovable is exercised in particular by the setting up of a maintenance logbook.
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Le certificat d’état d’immeuble correspond à un « bilan » de l’immeuble : il constate la qualité du bâtiment, à un moment précis. Il comprend l’inventaire des composantes de l’immeuble (espaces extérieurs, bâtiments, logements, équipements, etc.) qui feront l’objet d’une évaluation pour les fins du fonds de prévoyance. Bien il n’y ait pas d’obligation légale à cet effet, ce document devrait être préparé par un technologue professionnel, ingénieur, architecte.
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All co-ownerships have  common portions that need to be maintained. These may include corridors, stairs, gardens and elevators. The syndicate has an obligation to ensure their maintenance, since the declaration of co-ownership generally provides that it is the main person responsible for them. In addition, article 1039 of the Civil Code of Quebec stipulates that the syndicate has the obligation to ensure the preservation of the immovable and, by the same token, the maintenance of common portions. As for the maintenance of common portions for restricted use, for example balconies, it can be entrusted (in part) to the co-owners who have the enjoyment. This reduces the use of external service providers, thereby reducing the amount allocated to common expenses.
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Expenses related to the maintenance and administration of the common portions of a co-ownerships start from its constitution as a legal person. It is therefore necessary that each co-ownership sets up, upon publication of the declaration of co-ownership, a Board of Directors to administer it. To ensure the star up of the syndicate, the developer usually designates in the declaration of co-ownership (by-laws of the immovable), one of its representatives to act as the interim director of the syndicate.
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Preparing a forecast annual budget is an unavoidable task in co ownership. Its preparation, preliminary examination and adoption will ensure the proper functioning of the syndicate of co-owners. It is up to the Board of Directors to define its terms, in view of the expenses that will have to be paid to allow a syndicate to meet its obligations. The budget also makes it possible to fix the amount of the contributions of each co-owner to the expenses of the co-ownership. It will be prepared by the Board of Directors or property manager, based on the amounts spent in preceding financial periods, as well as anticipated non-recurring expenses. The preparation of the budget forecast requires time and rigor.  
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The law provides that a syndicate must keep a register at the disposal of the co-owners. Article 342 of the Civil Code of Quebec specifies that the board of directors keeps the list of members and the books and registers necessary for the proper functioning of the legal person. 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.  
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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:
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  December 14th 2015 - Besides seeing to the respect of the declaration of co-ownership, you as directors of a condominium must ensure the maintenance and conservation of the building. It is your uppermost duty and the majority of your tasks ensue from this fundamental obligation.
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Buying an apartment in a co-ownership is a major investment in a lifetime. To avoid being caught off guard during the process leading to your purchase, you should seek proper assistance.
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In the case of contingency funds, a syndicate of co-owners must have guidelines for the investment of the sums accumulated in the fund. It must  clearly define the return and risk objectives for a given period while taking into account constraints such as liquidity needs, the legal context and exceptional circumstances. This task is delicate, because a syndicate of co-owners acts asadministratorofthe property of others. That is why  it must submit to restrictive and precautionary rules on placement. The syndicate is thus subject to the rules of presumed safe investments  provided for in articles 1339 to 1344 of the Civil Code of Quebec.
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L’étude du fonds de prévoyance doit-elle être réévaluée régulièrement?
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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.
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  To establish an adequate contingency fund, the board of directors must  estimate the cost of major repairs  and replacement of common portions. Bill 16  amended the Civil Code of Québec to subject the syndicate of co-owners to certain additional obligations, including obtaining a contingency fund study establishing the sums necessary for this fund to be sufficient to pay for major repairs or the replacement of common elements. This study  must be made available to the co-owners.
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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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  With the adoption of the Civil Code of Québec in 1994, to fill a void in the Law, the Quebec legislature introduced the obligation upon a syndicate of co-owners to fund a "contingency fund”. Prior to the enactment of the Civil Code, it was a frequent occurrence for co-ownerships to have a "reserve fund", although the Civil Code of Lower Canada was mute on this issue. Most of the time, this fund was inadequate, due to the low level of contributions paid into it.
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