Reserve Fund Studies (RFS) - Bill 16
Since 1994, the Civil Code of Quebec requires the condominium syndicates to establish a reserve fund commonly called contingency fund. This fund, which is independent of the administration fund, is made up "according to the estimated cost of major repairs and the cost of replacing the common areas" (art. 1071 C.C.Q.). Part of the common expenses paid each month by the owners are deposited in the reserve fund. The purpose of this fund is to ensure that the syndicate of co-owners has enough money to pay for future repairs.
Although the Civil Code of Quebec requires that at least 5% of common charges be paid into the provident fund, all agree that this percentage is insufficient to ensure major repairs and the replacement of common areas at the end of their useful life. Hence the importance of carrying out a provident fund study in order to determine the amount of the minimum contribution to be paid to avoid overly large invoices when the time for major work arrives.
The study of contingency funds carried out by VICAT CONSULTANTS follows a well-defined methodology which can be roughly summarized in five separate points:
Perform a physical inventory of all common components of the building such as exterior walls, interior system, plumbing, electrical and mechanical systems, etc. that will require major repairs or replacement ;
Analysis of the condition observed, the actual and effective age, the remaining economic life and the current and future replacement costs for each component ;
Estimate of the amount required to cover future replacement costs ;
Analysis of the current balance of the contingency fund and analysis of previous contributions records amounts of the co-owners ;
Development of financing models to help the condominium achieve its financing objectives.
It is important to note that the study of contingency funds is different from a pre-acceptance inspection of the common areas or the building condition certificate for the condominium syndicate.