Although the law has not yet been adopted, it is expected that once it comes into force, every co-ownership association in Quebec will be required to have a contingency fund study conducted by a qualified professional. This study, to be renewed at least every five years, will assess the amounts needed to cover major repairs and the replacement of a building's common areas.
Once the law is adopted, co-ownership associations will have three years to comply. Despite this future obligation, many co-ownerships are still slow to prepare. However, the absence of such a study can have significant consequences for both current co-owners and potential buyers.
The contingency fund study is an essential financial planning tool.
It allows you to:
Here is a concrete example that clearly illustrates the importance of this study:
Last year, one of my clients presented a promise to purchase on a condo located in a co-ownership where no contingency fund study had yet been conducted. After analyzing the documents provided, I clearly recommended not to proceed with the transaction. Without such a study, it is impossible to know the true status of the contingency fund and the upcoming work, which represents a significant risk.
Despite my reservations, my client still chose to proceed with the purchase. A few months later, he contacted me again: the contingency fund study had just been completed, and the results were concerning. The syndicate was required to impose a special assessment of over $700,000 to cover the backlog in common area maintenance.
In his case, his share amounted to over $30,000. A significant and unexpected sum, which he must now assume. Furthermore, if he wishes to resell his unit, he will have to do so in an unfavorable environment: this assessment directly impacts the resale value and complicates a future transaction. Few buyers are willing to assume such an expense.
This type of situation is unfortunately more common than one might think. Too often, buyers overlook the importance of a well-structured contingency fund, or are unaware of the risks associated with its absence. It is therefore essential to be vigilant and to be well-informed before finalizing the purchase of a condo.
In conclusion, the contingency fund review should never be seen as a mere formality. It is a tool for transparency, prevention, and protection, both for syndicates and co-owners.
As brokers, real estate professionals, or individual co-owners, it is our duty to raise buyer awareness of this issue and promote well-managed buildings. A condo with a healthy contingency fund is not only safer, but also more attractive on the market.
Nathalie Audet, Residential Real Estate Broker
3299 Rue Beaubien E,
Montreal, QC H1X 1G4
Office Tel.: 514 374-4000
Cell Tel.: 514 966-4417
Email: [email protected]
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