Why the reserve fund study is important
In the field of divided co-ownership in Quebec, Bill 16 occupies a central place by strengthening the requirements related to ensuring their preservation. One of the key measures introduced by this law will be the obligation for co-ownership syndicates to carry out a reserve fund study. This study, essential to the financial sustainability of co-ownerships, deserves special attention.
What is a reserve fund study?
The reserve fund study is a financial forecasting tool. It aims to assess the funds needed to ensure major repairs and the replacement of the common areas of the co-ownership, over a specific period. This study thus makes it possible to anticipate future expenses and avoid unforeseen special contributions for the co-owners.
Contents of a reserve fund study
A reserve fund study must include several key elements, including:
Inventory of common areas: This inventory details all the elements that will require major repairs or replacement in the long term.
Assessment of the remaining lifespan of these components, allowing for planning of the necessary interventions.
Estimation of replacement or major repair costs, adjusted for inflation and market specificities.
Schedule of planned work, providing a clear vision of the interventions to be carried out in the short, medium and long term.
An economic analysis, demonstrating various financial projections related to contributions.
Regulation
Bill 16, adopted in Quebec in 2019, more strictly regulates the obligations of condominium syndicates. Concerning the reserve fund study, they stipulate, among other things, that:
A minimum contribution must be paid annually to the reserve fund, this amount being determined based on the results of the study.
While waiting for the reserve fund study to be completed, the amounts to be paid into this fund must correspond to 0.5% of the reconstruction value of the building.
Certain professional orders may be authorized to conduct these studies.
The fund must be partly liquid, available in the short term and its capital must be guaranteed.
Condominium syndicates must conduct this study every 5 years.
The fund must be allocated only to major repairs and replacements.
The fund is the property of the syndicate and its use is determined by the board of directors.
The annual contributions of the co-owners to this fund must be set on the basis of the recommendations of this study.
If the fund proves insufficient to cover the estimated cost of major repairs and replacement of the common areas, the board of directors must set the amounts that will be paid annually into this fund so that the amount in the fund is sufficient within a 10-year horizon.
The developer must provide the condominium syndicate with the reserve fund study within 30 days following the special meeting.
After the by-law comes into force, the board of directors will have three years to comply.
The government mentions in its Bill 31, adopted in 2024, that these standards may vary depending on the characteristics of a building. We are awaiting the publication of the specific standards established by a government regulation that will clarify several aspects that are still ambiguous. However, we maintain that a reserve fund study should be carried out since it aims to ensure prudent and forward-looking management of co-ownerships, thus protecting the financial interests of the co-owners.
Why is it so important?
The reserve fund study is crucial for several reasons:
Prevention of financial surprises: It helps avoid expensive special contributions for co-owners by planning future expenses.
Sustainability of the co-ownership: By ensuring sound and forward-looking financial management, it helps maintain and increase the value of real estate.
Intergenerational equity: It ensures that each co-owner contributes equitably over time.
Legal compliance: It guarantees that the co-ownership complies with the requirements of Law 16, thus avoiding potential sanctions.
Setting up a reserve fund study is therefore a pillar of responsible and visionary co-ownership management. By complying with Law 16, co-ownership syndicates not only ensure sound and transparent financial management, but also protect the co-owners' investment in the long term. The reserve fund study is not only a legal obligation, it is a strategic approach essential to the good governance of a co-ownership. Contact us to set up your reserve fund study and benefit from support in best practices for the healthy management of your co-ownership.
Discover our services
Reserve 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.
