Contingency fund survey: Contents of the report

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.

Elements to be taken into account

Conducting a contingency fund survey requires taking into account only foreseeable major repairs or replacement of the common portions, over a time frame of 25 to 30 years. Remedial work that must be carried out immediately by the board of directors, and its cost, are usually the object of a complementary survey.

A two-step approach

A contingency fund survey is based on two components. Firstly, a more or less comprehensive inventory of the buildings components, including their theoretical useful life expectancy, and, secondly, an economic projection based on the components replacement values must be completed. Such a projection will be used to determine the required annuities to insure that the accumulated amounts will be sufficient to ensure the sustainability of the immovable.

Useful life expectancy Determination

It is based on the information contained in the certificate of the condition of the immovable and the maintenance log. The main factors that can influence useful life expectancy are:

  • Quality of components and of their installation;
  • Exposure to climatic conditions;
  • The components level of use;
  • The maintenance level.

Format

The survey is therefore often in the format of a forecast table indicating the date on which the work should be carried out. This table can also specify:

  • Common portions building components that will require major repairs or replacement ;
  • Components theoretical remaining useful life expectancy, as well as the age;
  • The estimate of the replacement cost of each component at the time of the survey;
  • The balance of the contingency fund at the time of the survey;
  • The amounts to be paid into the contingency fund to carry out major repairs or the replacement of common portions;
  • The rate of return of the contingency fund and the rate chosen to take into account the evolution of the cost of foreseeable; major repairs or the replacement of common portions;
  • The chronological order of the work recommended by the professional.

This table can also indicate the state of repair of each component according to a rating system, which allows the prioritization of major repairs and the common portions replacement.

 

WHAT YOU SHOULD KNOW ! The maintenance log is a register tracing the history of the construction and of all the operations already made or to be carried out on the immovable. This document contains the main physical and technical characteristics of the immovable.

WHAT TO KEEP IN MIND : the contingency fund, as defined by the legislator, is the equivalent of a replacement reserve. Its primary objective is to accumulate the necessary liquid funds so that, at the appropriate time, the required sums are available.

WARNING ! A syndicate of co-ownership has the legal obligation to set up a contingency fund based on the estimated cost of major repairs and the cost of replacement of common portions. This fund must be separate from the operations fund and strictly reserved for major repairs of common portions and their replacement at the end of their life cycle, as opposed to their mere maintenance.

 CONSULT THE PUBLICATION: Travaux en condo: Tout ce qu’il faut savoir (Condo work: all you need to know) on pages 130 and following.

 

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