Financing plan of the contingency fund

Replacing windows, reroofing or rehabilitating underground parking slabs, to name but a few, is usually very expensive. Upgrading the common portions generally represents significant costs for the co-ownership and managing them can be complex. This reality is accentuated by the aging of Quebec's housing stock and the new obligations introduced by Bill 16. For this reason, the contingency fund study must set out the financial parameters that will make it possible to calculate the required level of contribution from the co-owners to finance essential interventions and maintain the asset in good condition.

Sufficient funding

Based on the different scenarios covered by the contingency fund study, the board of directors establishes the financing plan it prefers. This financing plan sets out the strategy put in place by the Board of Directors to meet the costs of the work estimated in the contingency fund study. It sets out the amounts of contributions that would be required from co-owners in future years, depending on the estimated work schedule. This forecast should not be limited to ensuring that the total income of the contingency fund, at the end of the period considered by the study, exceeds the total projected expenditures. It must also take into account the different times when it will be necessary to carry out this work so that the sums accumulated before the planned date of the work are sufficient to cover the full financing of these interventions.

Specific Financing

In principle, the syndicate does not have to account for every item in the contingency fund. It is a one-time fund and can be used for any major repairs or replacement of common portions. However, the contingency fund financing plan must, in certain circumstances, be specific to take into account common portions for restricted use. Article 1072, paragraph 3, of the Civil Code of Quebec provides for this rule. It states that in determining the co-owners' contribution to the contingency fund, their respective rights to the restricted common elements could be taken into account. For example, the declaration of co-ownership could include a provision allowing a co-owner to be charged as a specific common charge for the costs associated with the replacement of a terrace for which he or she has exclusive use. Therefore, the sums paid by that co-owner in respect of the contingency fund are attached to the fraction of the co-ownership concerned. Thus, each co-owner should inject, if necessary, into the contingency fund the required amounts, according to his or her respective rights over the restricted common areas. This is why accounting entries are necessary in the syndicate's books to identify the sums paid, held or spent on certain common areas for restricted use. 

Consultation with co-owners

The financing of co-ownership work is first and foremost a matter of establishing a budget. It is essential that this financing plan be presented to the co-owners, at an annual or special meeting, within a reasonable period of time. Thus, each of the co-owners has crucial information at their disposal in the event that their unit is put up for sale. Remember, any potential buyer needs to know what to expect, in the future, in terms of contributions to the contingency fund. Consulting the co-owners on a financing plan is an extremely important step. They will be able to evaluate its content and give an assessment of it. Some of them will want to comment on the amount of money spent on the various items. Other co-owners will ask for clarification or even suggest changes to be made. An "advisory vote" may even be held, although in principle it has no decision-making value.

WHAT YOU SHOULD KNOW ! A financing plan is a document that presents the financial needs of a syndicate of co-owners at its inception and then over several years and the financial resources allocated in return. The objective of the financing plan is to consistently balance the needs and resources of the co-ownership.

WHAT TO KEEP IN MIND : ​​ Once the financing plan has been established, it is necessary to verify that the initial needs related to the conservation of the building are sufficiently funded and that the financial structure is sound over the budgeted years.

WARNING !​ The co-owners must have all the documents available in order to be consulted on the financing plan of the contingency fund. This consultation with the co-owners will thus be able to be carried out in full knowledge of the facts.