On August 14, the long-awaited Regulation establishing various rules regarding divided co-ownership (the “Regulation”) came into force, marking a crucial step for co-ownership management in Québec. Since the enactment of Bill 16, syndicates must now comply with new obligations, and with the arrival of the Regulation, three major requirements have been introduced: the maintenance log, the contingency fund study, and the syndicate’s certificate. Beyond the formalities, these changes redefine the personal liability of directors.
The Maintenance Log
Qualified Professionals
The maintenance log is a key element in co-ownership management. The Regulation requires that it be prepared by a member of one of the following professional orders: the Ordre des ingénieurs du Québec, the Ordre des architectes du Québec, the Ordre des technologues professionnels du Québec or the Ordre des évaluateurs agréés du Québec.
Professional activities must primarily relate to management, construction, renovation, real estate appraisal, or inspection. In addition, the professional must not be a member of the board of directors, manager, co-owner, or occupant of the building concerned, nor the spouse of such a person. To avoid any bias in preparing the log, the chosen professional must also not be a director, officer, shareholder, or employee of a legal person, partnership, or trust that is a co-owner of the building, occupies it, or manages it.
Content
The maintenance log must contain a detailed inventory of the common portions as well as the materials, devices, and equipment that make them up, along with an assessment of their condition, remaining useful life, and planned replacement within the next 25 years.
Updating and Review
The syndicate must update the maintenance log annually. If any of the above-mentioned work was required but not carried out, the log must also state the reasons why. Furthermore, the log must be reviewed at least every five years by one of the qualified professionals mentioned above. For a building with no more than eight private residential units, a maximum of three above-ground storeys, and no common portions within a building, this review may be done every ten years.
The Contingency Fund Study
This study must be carried out by a member of one of the professional orders mentioned above. It may also be conducted by a member of the Quebec Chartered Professional Accountant, provided they are not a member of the board of directors, manager, co-owner, or occupant of the building, nor the spouse of such a person, and are not a shareholder, officer, director, or employee of a legal person, partnership, or trust that is a co-owner of the building, occupies it, or manages it.
The purpose of this study is to determine co-ownership’s long-term financial needs in order to avoid unexpected special assessments. The syndicate must obtain it at least every five years, and it must include the following information:
- The contingency fund balance used for the study;
- An estimate of the cost of all major repairs and replacements in the year of execution as indicated in the maintenance log;
- A recommendation on the amount that should be available in the contingency fund at the start of each year and the amounts to be contributed annually, specifying, where applicable, the portion reserved for financing major repairs to limited common portions and their replacement;
- An explanation of the calculations used to determine the above amounts.
The Syndicate’s Certificate
To better protect prospective buyers and regulate the syndicate’s liability when selling a unit, the new Article 1068.1 of the Civil Code of Québec provides that the syndicate must provide any prospective purchaser, within 15 days of a request, with a certificate regarding the state of co-ownership. This certificate must include:
- Financial information about the co-ownership, including the amounts in the contingency fund and the recommendation from the contingency fund study, the amount of common expense contributions required for the past three years and the amount paid by the co-owner concerned during that period, the total liquid assets available to the syndicate for current expenses, the annual surplus or deficit from the last three financial statements, the total amount in the self-insurance fund as of the certificate date, and the highest deductible under the syndicate’s insurance policies;
- Proof of insurance required under Article 1073 of the Civil Code;
- A summary of inspections and expert reports carried out in the past five years on the building’s general condition or its main components, any losses affecting the common portions or the private portion concerned in the past five years, details of major repairs and replacements to the common portions in the past five years, details of major repairs and replacements planned for the common portions in the next ten years, ongoing litigation involving the syndicate, and amendments made to the declaration of co-ownership in the past three years.
Coming into Force of the Maintenance Log and Contingency Fund Study Obligations
The Regulation provides that maintenance logs and contingency fund studies prepared within the two years preceding its coming into force remain valid for five years.
For co-ownerships that have not yet prepared a maintenance log or contingency fund study, there is a three-year grace period from the Regulation’s effective date to comply with the new obligations, with a deadline on August 14, 2028.
Our Strategic Advice
Complying with these requirements is an investment in your co-ownership’s value and safety. Our advice to syndicates: document absolutely everything—resolutions, decisions, follow-ups, building-related documents, and proof of updates to the maintenance log and contingency fund study. Delegate wisely by engaging qualified, independent professionals who can provide an objective, expert perspective. Also, ensure you have adequate directors’ and officers’ liability (D&O) insurance, reviewing and adjusting it regularly.
Do not hesitate to contact us with any questions regarding the Regulation or your co-ownership.