You may wonder what does undivided co-ownership mean and how it differs from the divided status? Undivided and divided co-ownerships in Montreal are not subject to the same legislation. This is particularly the case with respect to the constitution of the contingency fund. While this is mandatory in divided co-ownerships, the contingency fund for an undivided co-ownership is optional.

Divided vs. undivided co-ownership in Montreal: two distinct types of co-ownership

Divided co-ownership: the most common

Also known as a condo, a divided co-ownership is the best-known and also the most common type of co-ownership. Each co-owner owns:

  • a fraction—in other words, a private portion of the building to which they have exclusive use;
  • a share of the common portions of the condominium.

Undivided co-ownership or joint ownership

In an indivision agreement, the building is not divided into private and common portions: each undivided co-owner owns a percentage (undivided shares) of the entire building. This is also the type of joint ownership that can be found in the case of a couple who buys a house.

What is the purpose of the contingency fund?

The contingency fund is a fund specially intended to cover major repairs and replacements to the common portions in order to keep the building in good condition.

For example, it can be used to cover the costs of:

  • major repairs to the exterior cladding of the building;
  • replacing balconies or windows;
  • repairing the asphalt in a parking lot, provided that it is considered a common portion.

Contingency fund for an undivided or divided co-ownership in Quebec: what is the difference?

While the constitution of a contingency fund is mandatory in a divided co-ownership, it is optional in an undivided co-ownership and stems from a choice of the co-owners.

The contingency fund in a divided co-ownership is mandatory

Since 1994, the constitution of a contingency fund has been mandatory for any condominium syndicate, as stipulated in section 1071 of the Civil Code of Québec. The law provides that this reserve represents at least 5% of the contribution to the common expenses of the co-owners.

Contingency fund study

Unfortunately, this threshold is often insufficient in the case of many condominiums that stick to this minimum fund, underestimating the amount of work to be anticipated. Based on this finding, legislators introduced a new obligation for syndicates in 2019. With the establishment of Bill 16, it is now mandatory to conduct a contingency fund study for condos.

In an undivided co-ownership, the contingency fund is a choice

Conversely, the law does not impose an obligation to constitute a contingency fund in an undivided co-ownership in Quebec since the concept of common portions and private portions does not exist in this type of co-ownership.

However, there is nothing stopping the undivided co-owners from conducting a study and setting up a contingency fund. If the constitution of this fund is stipulated in the joint ownership agreement, the joint owners must contribute to it. Otherwise, they cannot be compelled to do so.

Get an expert for your contingency fund study

Our firm, Condo Stratégis, based in Montreal for over 30 years has specialized in property management and condo management. To offer the best to your condominium, do not hesitate to contact us as we provide you with the expertise of our multidisciplinary team and offer you personalized support.