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 2022 as planned, the documents will therefore be required from 2025.

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13 mars 2022 — Une étude sur le fonds de prévoyance a récemment été réalisée par l’Institut canadien des actuaires. Cette étude a confirmé une appréhension entretenue depuis plusieurs années : l’indiscipline de nombreux syndicats de copropriétaires a pour conséquence que le fonds de prévoyance des copropriétés reste encore trop souvent dégarni ou insuffisant. Il y est mentionné ce qui suit : Malheureusement à ce jour, les niveaux initiaux des sommes accumulées dans le fonds de prévoyance — selon les contributions minimales admissibles au fonds, calculées conformément à la loi — sont insuffisants pour assurer un amortissement raisonnablement uniforme des coûts au fil du temps et, sans surprise pour les personnes informées, se traduiront par une hausse des frais de copropriété ou des fonds insuffisants pour les réparations et les remplacements des parties communes. 
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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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Any syndicate of co-owners has obligations to assume in terms of the maintenance of the common portions. The certificate of the state of the immovable is an essential step to ensure the preservation of the immovable. It is a preliminary step before requesting the services of a professional to establish a contingency fund study.  The certificate of the state of the immovable corresponds to a "balance sheet" of the building: it notes the quality of the building, at a specific time. It includes an inventory of the building's components (outdoor spaces, buildings, dwellings, equipment, etc.) that will be evaluated to establish the amounts to be paid into the contingency fund. Although there is no legal obligation to this effect, this document should be prepared by a professional technologist, engineer, architect.
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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. This board of directors is the executive body of the syndicate and its legal representative. Its members act as the mandataries of the syndicate. 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. His role is to accompany the co-owners, manage the co-ownership and see to the organization of the special transition meeting to elect the new directors to constitute the board of directors.
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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 the syndicate must keep a register available to the co-owners. Article 342 of the Civil Code of Quebec specifies that the board of directors shall keep the list of members, as well as the books and registers necessary for the proper functioning of the legal person.  This register represents the memory of the building for those who administer it. It constitutes the history of the experience of the condominium from its conception, and this by specifying its maintenance and the work undertaken, while listing the contractors and suppliers who intervened. In this sense, it is invaluable. The syndicate must preserve for organizational and management purposes, or for legal protection and evidence purposes, all documents and information relating to the operation of the co-ownership. That is why "preservation", "access" and "archives" are the hallmarks of this register.
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When the sale concerns a fraction of a divided co-ownership of a residential immovable, the preliminary contract must be accompanied, at the time of its signature, by certain documents (such as forming with it an indivisible whole). This includes the information note on the essential characteristics of the project, whether it is a new co-ownership or under construction, or a building that has undergone major renovations to the point of now being considered new. In addition, the contract of guarantee will complete the preliminary contract. It concerns immovables or projects subject to the Regulation respecting the guarantee plan for new residential buildings, i.e. those with no more than 4 private portions stacked one above the other (apartments).
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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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By buying an apartment in a co-ownership, you will most likely invest the largest amount of money of your life. In order to avoid being caught off guard during the steps prior to this acquisition, you will need to be well accompanied. After finding the condo that suits you, the first thing to do is to appreciate the condition, as well as that of the building that houses it. Remember that the acquisition of an apartment is not limited to the purchase of its walls. You become an undivided co-owner of the common portions, for example the entrance hall, the roof, the interior garage, the elevator or the windows of the building. To do things right, you need to seek the services of a building inspector. The latter will examine the unit and building that are of interest to you.
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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 as administrator of the 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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In Quebec, about half of the syndicates of co-owners do not have any management tools to adequately provision the contingency fund for major repairs or the replacement of common elements. This problem, which sometimes has disastrous financial consequences for some co-owners, should soon be solved by the obligation to obtain a contingency fund study to which the Syndicates of co-owners will be subject by the upcoming amendments to the Civil Code of Québec following the adoption of Bill 16  in December 2019.  
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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”. This obligation was intended to fill a gap in the previous law. 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. Moreover, declarations of co-ownership often included a contribution limit (for example$ 50,000), beyond which it was no longer required to contribute the co-owners.
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