FACTS ABOUT THE RESERVE FUND - CONDOS

Are you planning to buy a condo and wondering about the relevance of having a contingency fund? Be aware that since 1994, the Civil Code of Quebec has stipulated that a minimum of 5% of the contribution to annual common expenses be devoted to the contingency fund. It is the responsibility of the condominium syndicate to collect these expenses, according to the value of each co-owner's fraction, and to pay a portion into the contingency fund.

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A CONTRIBUTION OFTEN UNDERESTIMATED

Although co-owners are required to pay the minimum of 5%, this amount is often insufficient to ensure that they do not have to dig into their pockets to finance major work. This is why, in order to properly build up a contingency fund, it is important to make a short-, medium- and long-term assessment of the cost of work to carry out major repairs to the common areas or to replace them, such as roof covering or foundations.

THE MAINTENANCE LOG: A VALUABLE TOOL FOR LONG-TERM PLANNING

An asset management expert can help you prepare a maintenance log and estimate the amounts that will be required in a few years to make the necessary repairs. Using these forecasts, the co-owners will be able to identify the amounts that will have to be allocated to the contingency fund. Poor planning could lead you to having to pay extraordinary contributions.

Be careful: the contingency fund is not a fund for unforeseen events. Some condominium associations choose to set up this type of fund to cover unplanned expenses of various types. It is sometimes the subject of a clause in the declaration of co-ownership.

SOURCE: https://www.centris.ca/fr/blogue/finances/l-heure-juste-sur-le-fonds-de-prevoyance