Contingency Fund

Article 1071 of the Civil Code sets out the general obligation of the syndicate in the following terms:

“1071. The syndicate establishes, according to the estimated cost of major repairs and the cost of replacement of common portions, a contingency fund to be used exclusively for such repairs and replacement. The fund must be partly liquid and be available at short notice, and its capital must be guaranteed. The syndicate is the owner of the fund, and the fund’s use is determined by the board of directors.”

The contingency fund is therefore mandatory and applicable to all divided co-ownerships in order to protect the common good.

However, in practice, there are very few rules to determine its amount.

It is partially for this reason that many co-ownerships do not have sufficient reserves in the contingency fund and that the problem arises when major work must be done. Obviously, in such cases, it is the co-owners who must assume special contributions, sometimes significant ones.

In order to provide a more specific framework for the said contingency fund, the legislator has added clarifications to article 1071, which will read as follows:

“Every five years, the board of directors shall obtain a study of the contingency fund establishing the sums necessary to ensure that the fund is sufficient to cover the estimated cost of major repairs and replacement of the common portions. This study shall be carried out in accordance with standards established by government regulation, which shall designate, among other things, the professional bodies whose members are entitled to carry out such studies.

The amounts to be paid into the contingency fund are determined on the basis of the recommendations made in the contingency fund study and taking into account the evolution of the co-ownership, in particular the amounts available in the contingency fund.

Until the promoter obtains the study of the provident fund, the sums to be paid into this fund must correspond to 0.5% of the reconstruction value of the building. »

Although these new provisions are not yet in force, we strongly suggest that the new procedures be introduced as soon as possible in order to make up for the accumulated deficits in the contingency funds.

For more information, do not hesitate to consult us.

Vanessa Low-Ken
Legal technician
Charland Avocat Inc.
Centropolis Laval
500-3055, boul. Saint-Martin Ouest
Laval (Québec) H7T 0J3
Phone: (450) 934-8700
Fax: (450) 934-8748
vanessa@charlandavocat.com