THE CONTINGENCY FUND
(CondoLegal.com)
Since the coming into force of the Civil Code of Quebec, the
Syndicate has to establish a contingency fund, that is a fund allocated
exclusively to major repairs and replacement of common portions, as
opposed to their regular maintenance. Although most declarations of
co-ownership already provided for such fund, it is now compulsory by law
and certain terms and conditions will have to be followed.
Constitution of the contingency fund
Each year, the Board of directors, after consultation with the general
meeting of the co-owners, fixes their contribution for common expenses
and for the contingency fund. As to the powers of the co-owners in this
respect, see our pamphlet entitled: "Common Expenses".
The Syndicate may also take into account, in fixing the contribution to
such contingency fund, the rights of any co-owner in the common portions
for restricted use. Certain declarations of co-ownership used to provide
for the establishment of more than one contingency fund, for specific
major repairs, by way of example for a category of immoveables. Such
practice is no longer allowed, since by law, only one fund is permitted.
The contribution of each co-owner is at least five percent (5%) of his
contribution for common expenses. There is no limit to the amount of
money that may be accumulated in such fund(s).
The contribution may be based on the "certificate of status of
co-ownership", ideally prepared by an engineer or an architect or any
other building expert.
Although such document is not a legal requirement in co-ownerships, it
provides a detailed evaluation of the immoveable, recommendations with
respect to maintenance procedures and guidelines on modes of
preservation and an approximate time frame within which replacement or
renovation of certain parts of the building will have to take place, as
the case may be.
Features of the contingency fund
A judgment rendered against the Syndicate of the co-ownership may not be
executed against the contingency fund, save and except if the
condemnation relates to work provided for by the fund; the Syndicate is
the owner of the fund and the monies shall be deposited in a financial
institution. The funds shall be liquid and available on a short term
basis, i.e.: available to the Syndicate upon notice not exceeding thirty
days.
The Syndicate has to ensure that the contingency fund accumulates each
month and each year, and that it is allocated exclusively to major
repairs and replacement of the common portions and not for their
day-today maintenance or management.
What happens if a co-owner fails to pay his contribution to the
contingency fund?
As in the case of failure to pay common expenses, the Syndicate may sue
in the Small Claims Court or register a legal hypothec against the
fraction of the delinquent co-owner. See our pamphlet entitled: COMMON
EXPENSES.
Moreover, a co-owner who has not paid his contribution to the
contingency fund for more than three (3) months, irrespective of the
fact that he may have paid his share of common expenses, shall be
deprived of his voting rights at the meeting.
