Most condo buildings in the province are classified as divided co-ownerships, meaning, the building has private dwellings and common areas that are shared.
The Quebec government passed Bill 16 in December of 2019 which provided new rules that must be implemented by all co-ownerships in Quebec. This new law provides a stricter and more efficient framework for the management of condominiums in the province.
Previously, each syndicate can manage its building as it sees fit. With Bill 16, standards for uniformity in the management of a co-ownership has been established.
The starting point of Law 16 is the study of the contingency funds. If you are involved in the administration of a condominium, you would certainly know of it.
- In this article, we will explain in detail what a contingency fund study is. We will also show you its approximate cost and offer a free online quote online right here.
Condominiums to have a contingency fund study every 5 years
Starting in 2023, condominiums will have to comply with Bill 16 and have a contingency fund study done for their building every 5 years.
The objective of this study is to allow the creation of a financing plan so that the syndicate has the necessary funds in the short, medium, and long term to cover the maintenance, repairs, and replacement costs of the common components of the building.
The bill requires that the fund must be liquid in part and be immediately available if an emergency arises. The capital must also be guaranteed.
This study must be carried out by a professional who is a member of a professional order recognized by the Quebec government.
The contingency fund study must be carried out every 5 years, and will, therefore, be an-ongoing process.
Here are the main requirements of Bill 16 which concern co-ownerships:
- A review of the contingency funds every 5 years
- Adoption of an official maintenance booklet
- Improved transparency between buyers and the syndicate
- More equitable distribution of responsibilities for common areas
- Sending of the minutes of meetings to co-owners;
- Etc.
What does a condominium contingency fund study include?
A contingency fund study is a global approach that essentially aims to ensure the proper maintenance of a building in the short, medium, and long term.
This study aims to offer recommendations concerning the amounts of money that the syndicate must collect through the condominium fees as well as maximize the useful life of the common components of the building.
But what exactly does a contingency fund study include in Quebec? First of all, it is important to understand that the professionals who carry out the study must obtain a contingency fund study accreditation from the RGCQ (Regroupement des gestionnaires de copropriété du Québec).
- This study is done in 7 major steps which we have presented below. It is a process that must be repeated every 5 years.
Step # 1: Inventory and quantification of the building's components
The first step of the contingency fund study is to make an inventory of all the common components of the building. The inspector must also quantify them.
The inventory will list each component, its materials, the quantity in the building, its location, and the exact dimensions.
Below is a list of common components for a condominium building:
- Windows
- Doors
- Roof
- Walls
- Balconies
- Access roads
- Land
- Recreational facilities
- Garbage containers
- Sewage system
- Etc.
At this stage, the professional will also collect all documents used by the union in its current management, for instance, budgets, financial statements, etc.
The inspector will also need to have access to building plans, specifications, and all other essential documents. It is the responsibility of the union to provide the necessary documentation.
Step #2: Inspection and evaluation of the condition of the common portions
Once the inspector has made an inventory of all the common areas that are under the responsibility of the syndicate of co-ownership, he will have to evaluate their condition.
The professional will make an on-site visit to visually inspect the accessible elements of the common areas of the building. This inspection is extremely important because it allows him to determine accurately the remaining life expectancy of the components targeted by the study.
If certain components are not accessible, the inspector will refer to the technical plans and specifications available.
Visual Inspection
The inspection performed is visual only. No destructive methods are used, including the opening of walls or any other operation that could damage the building.
RGCQ Standards
Certified inspectors must comply with RGCQ standards when assessing the condition and remaining life of existing condominium components.
Step 3: The building condition report
Once the inspection of the common areas is completed, the inspector will prepare and produce what is called a building condition report.
This report, also known as a building condition certificate, is based on the results of the inspection and is a snapshot of the current physical condition of the building.
This report will disclose the current condition of the various components of the building, and the recommendations of the professional as to whether a more thorough inspection of certain elements should be done.
Below are the contents of a building condition certificate:
- A description of the building
- A list of observations made during the inspection
- Color code from green to red: used to understand the priority of the findings for each component analyzed
- A very detailed section presenting the findings on the condition of the components and the problems observed
The last section of the report will be divided into different categories. The following is an overview of what may be included in the report:
- The interior of the building
- Roof and attic
- Exterior cladding, doors, and windows
- Foundations and structure
- Exterior landscaping and access roads
- Insulation and energy efficiency
- Electrical and plumbing
- Heating, ventilation, and air conditioning systems
- Drainage, sewers, and other equipment
Step 4: Evaluation of replacement costs and major repairs
Following the delivery of the building condition certificate, the inspector must conduct the evaluation of:
- The life expectancy of each component
- The replacement cost of each component
This analysis will be used to establish how often each component must be replaced, and how much it will cost to do the work.
This analysis of future replacement and repair costs will then form the basis of the financing plan.
At the end of this assessment, you will know how much money will be needed annually to replace each component of the building when the time comes. The estimated costs are based on standard construction industry grids.
25-Year Economic Projection
Replacement cost planning is presented over a 25-year horizon, but may consider a total of 60 years to account for the full life cycle of some components. This projection should be updated every 5 years.
Step 5: Establishing contingency fund financing plans
Once the replacement costs have been estimated, the inspector must then turn to the most important step-the establishment of a financing plan for the condominium.
The analysis may show that the condominium is not currently raising enough money annually to cover future building expenses.
- For example, if the inspector's estimate determines that $25,000 per year should be collected by the syndicate, and it only recovers $17,000 annually, there is a deficit of $8,000 per year.
The financing plan will then ensure that the condominium will have contributed enough to the contingency fund to cover the maintenance, repairs, and replacement of each component.
The financing plan may determine that you currently have a surplus, a balanced position, or a deficit. If you are in a deficit, these are the two possible strategies.
Option #1
An adjustment of the condominium fees will be made over a period of 1 year. This implies that the co-owners must increase their dues now, which can be a significant increase that can put financial stress on the co-owners. This scenario meets the requirements of the Act regarding contingency fund studies.
Option #2
An adjustment of the condominium fees will be made over a period of 10 years. This implies that the deficit will be spread over a longer period of time which will make the transition smoother for the condominium budget. However, it should be understood that during the transition period, special assessments may be made if replacement expenditures are required. This scenario also meets the requirements of the Act for contingency fund studies.
Step 6: The 5-year review of the contingency fund study
Once the union has selected the funding plan that best meets its expectations, it will receive a study report that includes the following sections, among others.
- Schedule of future expenditures for component replacement and major repairs for the next 25 years
- Breakdown of all expenditures by year
- Breakdown of expenditures by building component category
- Details and explanations of calculations and variables
- A summary of future expenditures by category
- A complete table of annual revenues and expenditures
- The various financing and contribution scenarios
- Heating, ventilation and air conditioning
- Drainage, sewer and other equipment
Once the study is completed, the syndicate must then follow the recommendations of the professional. To ensure that the syndicate respects everything, Bill 16 provides that this study must be repeated every 5 years.
This obligation aims to prevent the premature deterioration of the components and protect the co-owners against a possible special assessment.
Step 7: Setting up the maintenance booklet and calendar
Finally, the inspector will also have to put in place two important elements during the study of the contingency fund, namely
- The maintenance booklet
- The maintenance calendar
What are these elements which are now mandatory for all condominiums in Quebec?
The maintenance booklet is a kind of register that traces the history of all the operations done or to be done on a building. It lists all the maintenance contracts granted, the maintenance contracts, and the guarantees offered by the subcontractors.
The maintenance calendar is used to plan the dates when the maintenance of each common component of the building is scheduled. This increases the efficiency of the building’s maintenance and maximizes the life of the components. Building managers will be able to use the maintenance log and schedule to optimize the maintenance and long term life of the various components of their building. This schedule generally takes the form of a table presenting the tasks to be accomplished for the next 5 years.
Fee schedule - Quebec contingency fund study
How much does a contingency fund study under Bill 16 on condominiums in Quebec cost?
It all depends on the building. The fees vary from one condominium to another based on the number of units and other variables specific to each case.
You will find below the fee schedule for the approximate fees for the following:
- Building certificate
- Maintenance booklet
- Contingency fund
Together, these three elements make up a complete contingency fund study. For a free personalized quote, fill out the form on this page or click on the button below.
Condominiums with 2 to 4 units | Building certificate: $500 Maintenance booklet: $900 Contingency Fund: $1,250 |
Condominiums with 5 to 10 units | Building certificate: $750 Maintenance booklet: $900 Contingency fund: $1,250 |
Condominiums with 11 to 20 units | Building certificate: $1000 Maintenance booklet: $900 Contingency fund: $1250 |
Condominium of 21 units or more | Building certificate: $1000 + $50 each unit Maintenance booklet: $900 Contingency fund: $1250 |
Horizontal co-ownership (Price for 1 building) +$250/extra building | Building certificate: $250 Maintenance booklet: $900 Contingency fund: $1250 |
Get a quote for a contingency fund study in 2 minutes!
Do you need help with your condominium to comply with Bill 16 requirements? You will need a certified building professional who meets the standards for a contingency fund study.
At Compare Home Quotes, we have partnered with qualified professionals specializing in Bill 16 compliance who can be of assistance to you.
Fill out the online form on this page or click on the button below to obtain a quote for a contingency fund study, free of charge!
At the same time, you will be able to ask all your questions to find out how to optimize the management of your co-ownership under the new rules.
Send your request now, with no obligation or charge, so you can stop worrying about the requirements of Bill 16.
