Do you know the difference between the contingency fund study and the asset management plan?
Managing a co-ownership in Quebec, commonly called a “condo,” requires rigorous planning and a clear understanding of the tools available to ensure the sustainability of the buildings. Two key elements in this management are the asset management plan and the contingency fund study. Although they are sometimes confused, these two tools have distinct but complementary objectives and functions. This article aims to clarify these differences and explain their importance for co-owners.
Contingency fund study
The study of the contingency fund will become a legal obligation for condominium syndicates in Quebec with the coming into force of Bill 16, expected soon. Its main purpose is to ensure that the necessary funds are available for major repairs and replacements of the common areas of the building. This study mainly consists of defining:
Inventory of components: Summary census of the common areas of the building, their theoretical useful life, and their replacement or major repair cost.
Economic projection: Financial analysis predicting the annual contributions required so that the accumulated sums are sufficient to cover the estimated costs.
This study is essential to ensure that co-owners have the necessary resources, thus avoiding financial deficits for major foreseeable work. To learn more, read our article on the importance of the contingency fund.
The law also provides that this type of study is provided together with a maintenance log. The goal is to ensure proper maintenance of components in order to maximize their lifespan and thus reduce costs for co-owners. To learn all about the maintenance log, read our article.
Asset Management Plan
The asset management plan is a broader concept that is not legally required. However, some of its elements, such as the study of the contingency fund and the maintenance logbook, will become mandatory with the entry into force of Law 16 shortly. It includes not only the study of the contingency fund and the maintenance logbook, but also a health check, called a building condition certificate (Figure 1):
Building condition certificate : A comprehensive inspection of the current condition of the building, conducted by professionals such as architects, professional technologists or engineers. This report describes the condition of each component, notes observations and recommends corrective actions. The building condition certificate has a direct impact on the accuracy of the other two elements.
Maintenance logbook : A record detailing work history and planned maintenance operations. It includes, among other things, maintenance contracts, warranties, and procedures to follow to keep components in good condition.
Contingency fund study : A financial study to determine the annual contributions required to cover major repairs and replacements of common areas in the long term.
Figure 1 : Visual representation of the elements of the asset management plan
The asset management plan provides an overview of the physical condition of the building and allows for prioritizing the work to be carried out. This is particularly interesting for older buildings, where it is relevant to determine the priority of interventions requiring replacements or future major repairs and to situate the building in its life cycle to maintain the safety and value of the co-ownership.
The detailed assessment of the physical condition of the building makes it possible to identify the corrections to be made, as well as to specify the necessary maintenance, lifespans, replacement costs, financial projections and therefore, the contingency fund study and the maintenance logbook.
Why is this distinction important?
Confusing the asset management plan with the contingency fund study can lead to incomplete and ineffective management of the property. The contingency fund focuses on the financial aspect of future replacements and repairs of common areas, while the asset management plan also incorporates the current condition of components and maintenance needs. Together, they provide a holistic approach to condominium management, ensuring both long-term financial planning, preventative maintenance and necessary corrective work.
In summary, although the asset management plan and the contingency fund study are interconnected, they meet different and complementary needs. A good understanding and application of these tools is essential for the financial and physical health of co-ownerships in Quebec.
Discover our services
Contingency fund study
Our engineers assess your financial reserves for major repairs and replacements of the common areas of your co-ownership, in compliance with law 16.
Maintenance logbook
Our engineers will draw up your detailed schedule which lists the information necessary for the maintenance of the common areas of your co-ownership, in compliance with law 16.
Asset management plan
Our engineers carefully assess the current condition of your components in order to provide you with a comprehensive technical analysis report, thus completing your asset management plan.
