A draft regulation, the Regulation establishing various rules regarding divided co-ownership (hereinafter: the regulation), was published on September 11 2024 in the Gazette officielle du Québec. The final regulation could be enacted by the Government after a period of 45 days from this publication. Since then, we have been waiting for the final version of the regulation, which would come into force 15 days after its publication in the Gazette officielle du Québec.
This draft regulation helps to regulate the management of divided co-ownerships by defining, in particular, the standards applicable to the study of the contingency fund, the professionals authorized to carry it out, as well as the frequency of obtaining a new study.
This notion of studying the Syndicate’s contingency fund was introduced by Bill 16 in 2019. It is Section 1071 of the Civil Code of Québec (C.c.Q.) (enacted by Section 39 of Bill 16 and also amended by Section 2 of Bill 31) which mentioned standards to be established within a possible Government regulation, with regard to the study of the contingency fund.
This regulation has been expected for several years, because certain articles of law, including the passages of Section 1071 of the C.c.Q. referring to obtaining a study of the contingency fund, will not come into force until the date of entry into force of this regulation, but also because of the expected impacts concerning the costs imposed to produce the maintenance log, the study of the contingency fund, as well as the revision costs borne by the developers and co-ownership syndicates, as the case may be.
As of today, Section 1071 of the C.c.Q. currently in force still reads as follows:
1071. The syndicate establishes, according to the estimated cost of major repairs and the cost of replacement of common portions, a contingency fund to be used exclusively for such repairs and replacement. The fund must be partly liquid and be available at short notice, and its capital must be guaranteed. The syndicate is the owner of the fund, and the fund’s use is determined by the board of directors.
However, the following paragraphs will be added upon entry into force of the regulation:
Not in force
“The board of directors obtains a contingency fund study establishing the sums necessary for the fund to be sufficient to cover the estimated cost of major repairs and of replacement of common portions. The study is conducted in accordance with the standards established by a government regulation, which designates among other things the professional orders whose members are authorized to conduct such studies and determines the intervals at which a new study must be obtained by the board of directors. The standards may vary according to the characteristics of an immovable.
The sums to be paid into the contingency fund are fixed on the basis of the recommendations made in the contingency fund study and taking into account ongoing developments in the co-ownership, in particular the amounts available in the contingency fund
Until the developer obtains the contingency fund study, the sums to be paid into the fund must correspond to 0.5% of the reconstruction cost of the immovable.”
Note that the draft regulation also deals with standards regarding the maintenance logbook, the certificate from the co-ownership syndicate to be provided when selling a fraction of a co-ownership, as well as the terms for deposits paid to builders and developers.
Transitional measures are provided for in the reading of Bill 16 and the draft regulation concerning the obtaining of the first study of the contingency fund. In particular, if the final version of the regulation remains the same, co-ownerships that have taken a head start will be able to take advantage of the study already obtained under certain conditions:
the study of the contingency fund obtained by the Syndicate in the 2 years preceding the entry into force of this regulation is valid for a period of 5 years from the date of its obtaining by the Syndicate, to the extent that the person who carried out the maintenance log or the study of the contingency fund fulfilled, as the case may be, the conditions provided for in articles 1 or 7 of this regulation. (art.14 of the Draft Regulation establishing various rules relating to divided co-ownership).