Investments and availability of the contingency fund

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.

Authorized investments

Article 1071 of the  Civil Code of Québec  provides  that the  provident  fund must be partly liquid, available in the short term and its capital must be guaranteed. This therefore excludes any speculative investment. Themembers of the board of directors must  therefore restrict their choices to investments deemed safe within the meaning of article  1339 of the Civil Code of Québec. In addition, the amounts invested must not fluctuate, but must remain guaranteed throughout the duration of the investment (and not only at maturity). The money must be returned on request or within a maximum period of 30 days, unless the amount is guaranteed by the Autorité des marchés financiers (maximum of $100,000 per account and per financial institution).

Financial institution and liability

Article  1341 of the Civil Code of Québec provides that the sums of money must be deposited in a bank, a savings and credit union or another financial institution, if the deposit is refundable on sight or on a notice of not more than 30 days. For deposits of more than 30 days, they are allowed if the refund is fully guaranteed by the Autoritédes marchésfinanciers.

Thus, when the board of directors makes such an investment, the amounts should be:

Nature of investments

Article 1071 of the Civil Code of Québec provides that the provident fund is the property of the syndicate and its use is determined by the board of directors. It is therefore up to the directors to determine  the nature of the investments. These should be made according to the expected return and capital gain  and, as far as possible,  by diversifying the portfolio between fixed and variableincome.

The Provident Fund must be managed with the  objective of generating a sufficient return,while maintaining the value of the property. Thus, theinvestment of the sums allocated to the provident fund cannot be speculative. Indeed, the sums must be invested in a safe manner, in order to avoid any loss ("the capital must be guaranteed"). For this reason, board members must act prudently and diligently, investing the money they administer in accordance with the rules on deemed safe investments.

Investment policy

Investment income can still cover part of the amount of major repairs and replacement of common elements. Investment policy should therefore seek a balance between:

  • Performance;
  • The level of security; and
  • Liquidity needs over the years.

Moreover, since interest is not subject to income tax because of its conservative nature, it is not in the board of directors' interest to choose investments that are too risky.

Finally, the investment chosen must take into account the foreseeable evolution of the rate of inflation, since the rate of return varies with inflation.

Faced with all these parameters, it would be appropriate for the board of directors to use the services of a financial advisor as part of a study of the contingency fund,whose mission would be to propose the most relevant investments according to the needs of the union and all its inherent constraints. The choice of investments would therefore be made according to:

  • Requirements imposed by law and the declaration of co-ownership;
  • Inflation; and
  • Outflows of money provided for by the study of contingency funds.

 WHAT YOU SHOULD KNOW ! The sums  accumulated in the  contingency fund must be deposited in a financial institution, and part of these sums must remain liquid and available in the short term, that is to say, accessible on 30 days' notice. Forexample, the union can invest in the longer term the sums it holds for the repair of a roof that must be redone in twenty years.

 WHAT TO KEEP IN MIND:​ As the sums must be invested conservatively, it is necessary that they appear in the account of the provident fund, separate from the general account of the union, and that they be invested in accordance with the purpose of such a fund.

 WARNING ! The board of directors must not at any time invest the union's funds in risky investments or the capital may decrease. Article1339 C.c.Q.contains a list of investments presumed to be safe. The board will have to choose from this list.


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