July 6, 2022

Divided Co-ownership: What Is the Contingency Fund?

As the owner of a divided co-ownership, such as a condo, you must maintain your own personal portion, but you must also maintain the various common portions of the building. But who must pay for the major repairs and the maintenance of the common areas? It is precisely to provide a framework for this collective effort that the contingency fund was set up. To learn more about this obligation, read the following article.

1. What Is a Contingency Fund?

The contingency fund is a monetary reserve which is used to finance the realization of renovations and major construction work in the short, medium, and long-term within the common areas of a co-ownership[1]. It should be partly cash, available in the short term, and its capital should be guaranteed[2]. Thus, it is a collective means of maintaining the building in good condition by avoiding the co-owners having to pay a special contribution for emergency repairs, which could compromise their personal financial situation.

In effect as of the 1994 Civil Code of Quebec, this obligation aims first and foremost to remedy the lack of financial supervision which had penalized many co-owners for whom the co-ownership syndicate did not accumulate a sufficient reserve of funds to properly meet the maintenance needs of the building[3].

2. How Do You Determine What the Contingency Fund Will Be Used For?

How do you determine what the contingency fund will be used for?

  • In order to identify what work can be done with the contingency fund, the Board of Directors of the condominium will have to examine the Declaration of Co-ownership which sets out, among other things, the common areas of the building.


Major repairs must involve “a significant part of the property and require an exceptional expense,” as stipulated in the Quebec Civil Code. They could therefore cover:[4]

  • Beams, load-bearing walls, and the roof
  • Doors, windows, and balconies
  • Exterior siding and gutters
  • Heating, electrical, and plumbing systems
  • Replacement of asphalt in the parking lot
  • Rehabilitation of common areas

To sum up, the contingency fund cannot be used to pay for minor repairs or maintenance costs. Nor can it be used to pay fees, deficits or to make improvements to the building[5]. It also differs from the unexpected fund which is sometimes the subject of a clause in the declaration of co-ownership and which, as its name indicates, is intended for unexpected expenses to be incurred by the co-ownership syndicate[6].

3. What Is the Co-owners’ Contribution?

As with all the other common expenses, the contribution of the co-owners is determined according to the relative value of their fraction of the building. It is generally paid monthly, at the same time as the other expenses of the co-ownership.

According to the Quebec Civil Code, the contingency fund must represent at least 5% of the contribution to the common expenses[7]. However, in order to get a realistic amount, the syndicates will have to evaluate the replacement and repair costs of the common portions through a contingency fund study.

4. What Is the Contingency Fund Study?

Sometimes the minimum contribution of 5% to the contingency fund is insufficient to ensure the actual maintenance of a co-ownership. In order to remedy this situation, the Government of Quebec has adopted Bill 16 which provides for a study of the contingency fund by a professional every five years[8]. This exercise is intended to help the co-ownership syndicate to plan future expenses, while limiting unforeseen events.

Thus, a contingency fund study includes[9]:

  • Visual inspection of the main physical components of the building to determine their condition and lifespan.
  • Planning of the repairs that need to be done on a priority basis.
  • Evaluation of the repair costs of the common areas.
  • Analysis of the financial contribution scenarios by all the co-owners.
  • It is therefore essentially a planning exercise which allows for the establishment of a short—and long-term financial plan which is the subject of a detailed report including various recommendations.

5. What Is the Difference Between Administration and Self-Insurance Funds?

The condominium fees that must be paid include the administration fund, the self-insurance fund, and the contingency fund. Each of these funds has its own function[10]:

  • The administration fund is used to pay ongoing expenses such as maintenance and administrative tasks.
  • The self-insurance fund is used only in the event of an insurance claim and is used to pay the various deductibles.
  • The contingency fund, on the other hand, is intended for repairs and major renovations to the common areas of the building.

In conclusion, the contingency fund is an essential element in the management of a co-ownership. Besides avoiding the payment of special dues in case of an emergency, it allows each co-owner to benefit from judicious management of the various expenses related to their property. It is also a sign of confidence when it comes time to sell your co-ownership.

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