Anyone who lives in a condominium knows the new financial obligations that weigh on their condominium.
These are contained in two pieces of legislation already explained in this section, Law 16, which concerns in particular the provident fund, and Law 141, which concerns, among other things, the issue of insurance.
The co-owners still sleeping on gas will find the alarm clock uncomfortable.
Those most likely to ignore these changes are small condo dwellers. If you live in a two-family, three-family or semi-detached house structured in split ownership (there are many), you would mistakenly think that the new laws are aimed at large complexes.
It’s true that they particularly target large condos because that’s where most of the issues we’re trying to fix are concentrated. The little ones are no exception. If they sneak out, the police won’t show up at their house. But the co-owners are no less exposed to future troubles.
Let’s explore the question.
A personal experience
I live in a co-owned two family home with great neighbors. I’ve been able to think about the matter for the past few months. I realize that the information doesn’t get through, and when it does reach the co-owners, they don’t feel affected.
As my work prompted me to research the subject, I carried the file with us. Until then, our co-ownership housed an administration based on trust and “good neighborliness”, with a provident fund that was funded “like an amateur”.
Now here is what our “system” replaces, in accordance with the requirements of the above laws.
1. Provision fund study
We had to hire a company to inspect our duplex, establish a 25 year schedule for major work to be done on the building and estimate the cost of the work to determine contributions to the emergency fund.
Few companies offer this service for small condominiums, the industry is still not very regulated and is not characterized by a particularly high level of professionalism. Despite this, we have a better idea of the condition of the building, the necessary interventions and what it will cost… Our costs have almost doubled.
We also need to find a way to grow that money because the calculations are based on a 3% yield, as is our assumption of inflation over a 25-year period.
2. Maintenance log
The same company made our maintenance booklet, which is also mandatory. The document lists the tasks and minor works that must be carried out on a regular basis to prevent the main components of our building from deteriorating faster than planned.
3. Auto Insurance Fund
We need to open another account where we can deposit the equivalent of the highest deductible listed on our policy for a period of a few years. This fund is used to cover the first $5,000 in the event of a claim.
4. Evaluation of the reconstruction costs
A surveyor needs to estimate how much it will cost to rebuild our building after a total loss. In addition, it also has the mandate to describe the reference units in order to distinguish what is covered by the co-ownership insurance and what is covered by the co-owners’ individual insurance.
All of these steps, including providing funds, cost a fortune.
Is it too hard?
When we discuss this among neighbors, a tricky point quickly comes to the surface: the money that each of us pays into the till no longer belongs to us, but to the union. Why not pile everyone for themselves?
That is the difference to a single-family house. Its owner can provide for the work at any time, but the sums remain without being transferred to a third party. When reselling, he leaves with his money, while the buyer buys the building as is without inheriting the funds set aside for repairs.
With a condominium, no matter how small, it’s the other way around: the money stays. This should be reflected in resale value but is less certain in a tight supply market.
It’s still a good thing that the fund is union owned and here’s why.
If my neighbor gets off the boat with his share of the fund, there is no guarantee that whoever is going to replace him will have the funds needed to get the job done on time. That would be a risk for the building, i.e. for me.
In addition, Law 16 provides that the consortium must issue a certificate of conformity to the prospective purchaser of a unit. This provision is not yet in force, it needs to be clarified by regulation, but it will come.
The co-owners will have an interest in the co-ownership affairs being in order, because without being able to present the relevant certificate, they will have greater difficulties in selling.
In the long term, the preservation of the housing stock for this type of husbandry will only get better.
It’s cumbersome and expensive, yes, but necessary…