Contingency funds study
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Contingency funds study and bill 16
In Quebec, since January 10th, 2020, article 39 of Bill 16 (2019, chapter 28) stipulates that: “Every five years, the syndicate of co-owners must obtain a study of the contingency fund establishing the necessary sums and if this fund is sufficient to cover the estimated cost of major repairs and replacement of common parts. […] The sums to be paid into the contingency fund are set on the basis of the recommendations made during the study of the contingency fund and taking into account changes in the co-ownership, in particular the amounts available in the contingency fund.”
WHY CONDUCT A CONTINGENCY FUND STUDY ?
The study of the contingency fund should allow the creation of a short, medium and long term financing plan, so that the repairs or the replacement of important building elements of the common areas can be carried out. This study will specify what the syndicate will have to accumulate, annually, so that the contingency fund is sufficient and thus avoid having to impose extraordinary contributions to the co-owners.
What is a study of contingency fund ?
In order to determine the components of the building covered by the contingency fund study and the maintenance log, it is essential to carry out the inventory of the components of the common areas as complete as possible An specialist buidling inspector will carry out an inventory of each element of the building that will sooner or later require replacement or on-site maintenance with a visual inspection of the common areas and remotely using the plans and specifications available. This inventory includes, among other things:
Here is a summary of the elements that make up this study and the documents that will be given to you as part of the service.
WHAT DOES A CONTINGENCY FUND STUDY GIVE YOU?
Based on the previously calculated expenditure plan, funding strategies to determine contingency fund contributions will be established. They will ensure that the condominium has the required sums to finance replacement or major maintenance work when it is scheduled to be carried out. A total of three strategies will be developed. Each will take into account the amounts currently accumulated in the account dedicated to the contingency fund, current contributions to the co-owners’ fund and anticipated returns on investments from amounts that will be accumulated over the next 25 years. The proposed strategies will be broken down as follows:
The first strategy presents the adjustment of owner contributions over a period of one year. This adjustment ensures that the co-owners now contribute the amounts required to finance future maintenance and replacement work. Although this scenario meets the requirements of the Law regarding the study of contingency funds, it can be a significant increase which risks placing considerable stress on the co-owners budget.
The second strategy presents the adjustment of owner contributions over a period of five (5) years. This strategy, which respects the transitional requirements of Law 16, will ease the transition between the current contributions of the co-owners and the necessary contributions calculated to finance future maintenance and replacement work.
The third strategy presents the adjustment of owner contributions over a ten (10) year period. It also meets the transitional requirements of the Act by further easing the transition to the necessary calculated contributions. It should, however, be borne in mind that the spreading of contribution adjustments may result in the need for a special contribution aimed at paying for work required in the transitional period.
A SERVICE THAT GOES WELL BEYOND THE STUDY OF CONTINGENCY FUNDS
Make sure you get the most out of your building. Our condominium specialists offer you a full range of services related to the management of a condominium building: reception of the common areas, study of contingency funds, technical expertise and search for causes for all problems such as water infiltration or odor diffusion. With no other product to sell you, you can rest assured that they are offering you unbiased expertise and a fair and complete picture of your situation.
Whatever your needs in relation to your building, you can trust our condominium specialists!