Acts 16 and 141 and : new challenges for divided co-ownership
Author: Claudia Chauvette, Lawyer, Chartered real estate broker
Since the adoption of Acts 16 and 141, the syndicate of co-owners and their members have had to implement new measures to comply with this legislation.
Requested for several decades, these acts address the lack of a scale for setting condo fees and the lack of funds for building maintenance. As a result of this absence, many condominiums today need major repairs, however the syndicate does not have the funds to carry it out. The solution, therefore, is to impose a special assessment on co-owners. This unexpected charge can have a real impact on the co-owners’ budget.
Obligatory maintenance log and contingency fund study (Act 16)
From now on, co-owners will be required to obtain a building maintenance log, which will establish the repairs required over the years and their cost. The contingency fund will also have to be audited to certify that contributions are sufficient to comply with the maintenance log. There are many companies that offer services to carry out this type of work.
Let’s take the example of a four-condo building built in 1995. Knowing that a roof has a life expectancy of 20 to 25 years, co-owners may have to spend several tens of thousands of dollars for its repair. If the expense has not been budgeted for, co-owners will have to pay a special assessment of several thousand dollars.
With the adoption of Act 16, this predictable expense will be budgeted as soon as the building is built, spreading the cost over all the building's generations of co-owners over the years.
The self-insurance fund (Act 14)
Generally speaking, condo owners are required to pay an amount each month to the syndicate of co-ownership known as "condo fees". This amount was deposited into two funds: the operating fund to pay for current expenses (insurance, snow removal, cleaning of common areas, etc.) and a portion for the contingency fund, to finance building maintenance over the years (roof, doors and windows, etc.).
One of the impacts of Act 141 was the creation of a "3rd fund", the self-insurance fund. The sums deposited in this fund are primarily intended to cover the deductible stipulated in the insurance contract, and to compensate for losses not covered by the contingency fund or an insurance indemnity. It is the syndicate that sets up the self-insurance fund and ensures its short-term liquidity and availability.
The amount set aside in the self-insurance fund must be equal to the amount of the highest deductible among the insurance contracts taken out by the syndicate. The minimum contribution to the self-insurance fund is set by government regulation.
Co-owners and syndicates
Act 141 also added new responsibilities to co-owners and to syndicates.
As such, co-owners and the syndicate must take out an insurance to cover their liability to third parties and to hold coverage for the acts and omissions of members of the board of directors.
Amount of insurance and replacement value for condominiums
Act 141 requires that the amount of insurance corresponds to the cost of rebuilding a building in accordance with the standardized norms.
Every five years, an appraisal of the building must be carried out by a member of the Ordre des évaluateurs agréés du Québec.
Description of private portions
There is also an obligation to give a description of the private portions of the co-ownership to clearly identify improvements made by the co-owners. This makes it easier to identify what should be covered by the co-owner's insurance versus that of the syndicate.
The Best Tools When Buying a Condo
If you're planning to buy a condo, make sure your broker obtains the DRCOP form (Request for information to the syndicate of co-ownership) from the seller. This form, signed by an official representative of the syndicate, will specify the amounts of common expenses, the presence or absence of special assessments, the amount accumulated in the contingency fund, etc.
The Seller's Declaration form also contains a section on the self-insurance fund and the asset management plan.
In addition, it is imperative to obtain the co-ownership's financial statements and the minutes of the co-owners' meetings, over the last two years, at the minimum. These documents will provide you with valuable information about the property you wish to acquire.
Finally, a thorough building inspection by a qualified professional will also help you learn more about the property you wish to acquire.
This article contains general information and should not replace legal advice from a lawyer or a notary that would take into account your specific situation.