December 5, 2019 marked a decisive turning point for Quebec with the coming into force of Bill 16, redefining the law of divided co-ownership established since 1994. Signed on 10 January 2020, it responds to the rise of condominiums by aiming for transparent, responsible and sustainable management. The article dissects the major axes of this law, addressing property maintenance, the responsibilities of syndicates and developers, the taxation of syndicates, and the repercussions for co-owners. Tools such as the study of contingency funds have become mandatory to guarantee the sustainability of real estate assets, while ensuring legal compliance and rigorous management of co-ownerships.
The article dissects the major axes of this law, addressing property maintenance, the responsibilities of syndicates and developers, the taxation of syndicates and the repercussions for co-owners.
Genesis and justification
Faced with the evolution of real estate issues and the popularity of co-ownerships, Bill 16 emerged to renovate the legal framework, promoting a more efficient administration of shared buildings.
New requirements of Bill 16
Innovations for divided co-ownership
Major legal changes are taking place with this law, influencing the conservation of buildings, the adjustment of the quorums for changes to the declaration of co-ownership, the audit of the contingency fund, the management of the maintenance logbook and the establishment of transparency rules during transfers.
Consequences of the reforms
These readjustments led to a significant improvement in the management of condominiums, standardized their administration and clarified the state of the syndicates, leading to more informed transactions. However, they are a challenge for condominiums with less rigorous practices.
Criminal coercion
Bill 16 confers increased responsibility on co-ownership managers who, faced with the reinforced obligations, must commit themselves to rigorous management or face legal repercussions.
This requirement highlights the imperative of a scrupulous administration, in accordance with recent standards, to safeguard collective interests and avoid legal consequences.
Enhanced Quorum
Bill 16 introduces a higher quorum requirement for certain critical decisions, ensuring that major resolutions, such as major changes to the declaration of co-ownership, receive a broader consensus.
In-depth understanding of Bill 16
Mandatory studies
The law establishes the need for periodic studies such as the evaluation of the contingency fund every five years and maintains the obligation to keep an up-to-date maintenance logbook.
The maintenance booklet
The introduction of article 1070.2 of the Civil Code of Québec through Bill 16 establishes the mandatory keeping of a regularly updated and revised maintenance logbook, the form and content of which are defined by government regulation.
On the eve of the application of new regulations, the government unveiled on September 11, 2024 the broad outlines of a regulatory framework that is still unprecedented:
From now on, each building will have to have a maintenance logbook, an essential document that will list the constituent elements of the common areas and their equipment. This manual will have to explain the necessary maintenance operations, their periodicity and to scrupulously record the history of the interventions with the key dates. The update of this booklet will be done annually, with an in-depth review every five years. The authenticity of the inspection and the consultation of the relevant documents will be guaranteed by the signature of the person in charge.
In addition, Bill 16 revised article 1071 of the Civil Code of Québec, establishing an obligation for syndicates of co-ownership to conduct a periodic analysis of the contingency fund. This evaluation, carried out by experts from recognized professional orders such as architects or engineers, will make it possible to adjust the contributions to the fund according to the foreseeable expenses for the repair or replacement of the common portions. This approach aims at sound financial management and the equitable distribution of expenses among the co-owners, thus guaranteeing proactive management in accordance with the requirements of property maintenance. Syndicates of co-ownership, at the forefront of the implications of Bill 16, must orchestrate the study of the contingency fund and manage it taking into account the recommendations resulting from this analysis. They are responsible for evaluating the co-owners’ contributions and establishing a sustainable financial strategy. They must also keep a meticulous maintenance logbook, a faithful mirror of the history of interventions and a reflection of the current state of the building, while anticipating future maintenance and repair needs.
The draft regulation requires that the study of the contingency fund be a systematic exercise for all syndicates of co-ownership in Québec, and only by professionals approved by recognized orders. It should be noted that members of the Board of Directors are excluded from this task. This study, which will have to be renewed every five years, will be signed and dated by its author.
As for developers, Bill 16 commits them to new practices: providing exhaustive documentation including a precise assessment of the condition of the building and an initial provisional budget at the first general meeting. They will also have to present an initial study of the contingency fund, establishing an adequate level of provisions from the beginning of the project. These measures aim to instil responsible and sustainable management from the outset of co-ownership projects, in accordance with the requirements of Bill 16.
Enhanced responsibilities for co-owners
Bill 16, which primarily targets the directors of condominium syndicates, also significantly commits each co-owner. The time has come for stricter real estate administration; Condominium fees could rise to meet the needs of maintenance and major repairs.
Budgetary transparency is at the heart of this reform. Now, homeowners will have a clear view of finances and maintenance needs, expecting increased commitment and receptivity to inevitable cost increases to ensure the sustainability of their common good.
Essential role of the contingency fund
Bill 16 is the subject of debate, increasing the financial pressure on co-owners and the liability of directors, but the contingency fund remains a pillar:
- Long-term vision: The analysis of the fund makes it possible to anticipate the costs of repairing and renewing shared spaces, ensuring adequate cash flow for future deadlines.
- Avoidance of sudden expenses: Through a staggered contribution, co-owners protect themselves against costly unforeseen events, which is a guarantee of greater financial stability.
- Preservation of real estate value: Meticulous maintenance, supported financially, not only helps to preserve but also to enhance the value of properties.
- Fairness between owners: The fund ensures a fair distribution of the costs of major repairs, avoiding overburdening a small group with unforeseen calls for funds.
- Compliance with legislation: With the gradual coming into force of Bill 16, the constitution of a contingency fund becomes a legal requirement, essential to the good governance of the co-ownership.
New Bill 16 guidelines for recent condominiums
For emerging condominiums in Quebec, Bill 16 introduces major changes for clearer and more forward-looking management:
- Immediate creation of a contingency fund: Upon delivery, the developer must establish this fund, thus guaranteeing future resources for the maintenance of the building.
- Moving away from the old 5% method: The practice of setting aside 5% of the budget or reconstruction value is outdated and often insufficient for long-term needs.
- Rigorous evaluation of the fund: The law requires an estimate based on concrete data, discarding hazardous approximations.
- Initial analysis of the fund by the sponsor: It is up to the sponsor to determine the necessary contributions, ensuring reliable financial management from the outset.
- Transparency for buyers: Developers must now fully disclose information related to finances, building management, materials chosen, and suppliers engaged.
These measures are part of a process of sustainability and increased accountability in the condominium sector.
In Quebec, the adoption of Bill 16 marks a significant step forward in securing real estate transactions for future condo owners. This legislation requires developers to set up a contingency fund that is established on a realistic basis as soon as the keys are handed over. This fund is based on prospective studies of future costs and is accompanied by an exhaustive disclosure of the details relating to the management of the condominium and the construction materials used.
This same law requires more rigorous management of condominiums through the application of strict standards. Condominium associations must now maintain an up-to-date maintenance register, meticulously monitor contingency fund studies , and set up a self-insurance fund. These provisions ensure optimized governance and increased protection for buyers.
The implementation of these measures, combined with more stringent insurance criteria , plays a major role in safeguarding the interests of buyers by providing them with clarity and reliability of information on their investment. To go further, Bill 16 enlightens buyers on the financial implications and obligations arising from their purchase, a crucial step for informed and serene decisions.
During sales, the co-owner seller is required to draw up a declaration revealing any imminent special contribution or any major work project. This certificate, which is a key element of financial transparency, informs the purchaser of the potential costs and financial responsibilities inherent in his or her investment, including exceptional contributions for renovations or unforeseen repairs.
This approach aims to provide the buyer with an exhaustive view of the financial situation of the condominium and its future expenses, allowing him to accurately assess the overall cost of the planned investment. It prevents post-acquisition surprises, ensuring choices based on complete and verified data.
The certificate must detail at least:
- The current amount of the contingency fund, as well as the floor recommended by the corresponding studies.
- The total contributions to the common expenses claimed from the co-owners over the last two years.
- The balance of the current account.
- A certificate of insurance from the syndicate.
- A summary of ongoing inspections, expert appraisals, claims, major work and litigation.
Thus, Bill 16 is positioned as an essential tool for any enlightened buyer wishing to secure his real estate purchase in the condominium sector in Quebec.
Governance and clarity in co-ownership
Quebec legislation takes a giant step forward with the introduction of Bill 16, which reinvigorates the management of condominium buildings. Priority is given to transparency and impeccable governance. The directors are required to maintain exemplary management, guaranteeing the co-owners direct and exhaustive access to information.
Now, administrators are taking on greater responsibility for the dissemination of data, committing to communicate promptly and clearly, while providing justifications for key decisions. These reforms aim to refine management practices, ensuring the sustainability and flourishing of co-ownerships.
Duty of rigour for directors
As pilots of the board of directors, directors must scrupulously comply with the legal obligations that govern syndicates of co-ownership. They must act diligently, in accordance with pre-established standards, thus linking their professional responsibility to the administration of the co-ownership. They must ensure accurate documentation of their actions, transparent financial management and exhaustive communication with the co-owners.
This rigour and legal compliance are not only legal imperatives, they also constitute a safeguard for the administrators themselves, mitigating the risks of discord and litigation.
Clarification on Bill 16
Bill 16, although adopted, has not yet seen all its provisions come into force. The Board of Directors is encouraged to adjust annual contributions to anticipate the future and avoid unexpected special contributions. However, on September 11, 2024, the government introduced the proposed regulations, allowing 45 days to receive comments. Following this period, the official publication of the regulation is expected, and the unions will have three years to comply.
In conclusion
In anticipation of the full implementation of the new provisions of Bill 16 and the government regulation, condominium syndicates are strongly advised to initiate their first contingency fund study while ensuring that the maintenance logbook is kept flawlessly.
These steps are crucial for the financial well-being and long-term stability of condominiums, for a better structured management of the common elements, avoiding unforeseen expenses. Proactive management is essential to preserve real estate value and to prepare effectively for future legal requirements.
