Definition : Contingency fund - Separate bank account

At our last annual co-owner's meeting, the board of directors informed us that it was going to take $10,000 from our contingency fund to set up a self-insurance fund. To justify their decision, the directors said that this will allow to avoid putting up a special assessment. Several co-owners seemed to agree. However, I am of the opinion that such a way of doing things is totally illegal. Question: Can the board unilaterally decide to use part of the sums accumulated in the contingency fund to set up a self-insurance fund without consulting or obtaining the approval of the co-owners? And if so is this a good way to manage the funds of our co-ownership?  

With the coming into force of the Civil Code of Québec in 1994, the Québec legislature introduced the obligation for any syndicate of co-owners to set up a « contingency fund » in order to anticipate and finance future expenses to repair and replace the common portions, whether the building or the equipment located therein. This fund is strictly reserved for major repairs and replacement of common portions. It should not be used for maintenance. 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. A look at the different aspects of this collective savings.

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.

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?

Prevention tool The desire to encourage owners to opt for a forward-looking management of their assets and to anticipate the completion of major work is not new. Before the Civil Code of Quebec came into force in 1994, it was common for a co-ownership to have a "reserve fund", although the Civil Code of Lower Canada was silent on this issue. The majority of declarations of co-ownership contained provisions on the reserve fund. It was frequently mentioned that the co-ownership budget should include a reserve fund item for the accumulation of reserves for major expenses that are not imminent but foreseeable in the more distant future. However, the Fund was mostly insufficient, owing to the low contributions made to it.