Monday December 8 2025

WHAT EXPENSES SHOULD BE INCLUDED IN THE CONTINGENCY FUND?

Learn about the rules for using the contingency fund in a condominium: eligible expenses, Law 16, and best practices for avoiding mistakes.

In a condominium, the contingency fund is mandatory and essential for preserving the value and ensuring the longevity of the building. However, a misconception persists: “It can be used for all major expenses.” This is false. Its use is governed by Bill 16 and by the contingency fund study.

WHY IS THIS FRAMEWORK IMPORTANT?

The contingency fund is used to finance major long-term planned work. It protects co-owners against financial contingencies and ensures the sustainability of common areas. It cannot be used for unexpected expenses or routine maintenance. Using it outside of this framework means running the risk of running out of cash for mandatory work.

The contingency fund is reserved for a number of expenses related to major repairs and replacements.  With the introduction of the ASEC attestation, we must provide co-owners with certain information that they are required to disclose to prospective buyers, including:

• the amounts accumulated in the contingency fund on the date of the attestation;
• the amounts that must be in the contingency fund at the beginning of the fiscal year according to the contingency fund; and
• major repairs and replacements carried out in the last 5 years.

In order to provide accurate information on the balance of the contingency fund, it is therefore necessary to accurately record, from the initial accounting entry, the expenses that must go into this fund. It is therefore crucial to understand what can legitimately be charged to this fund. Here is a short guide to help you with this:

ELIGIBLE EXPENSES

• Major repairs to common areas (e.g., building structure, roof, foundations).
• Replacement of common areas (e.g., common windows, elevators, central heating systems, exterior cladding).
• Long-term planned work based on the contingency fund study (mandatory every 5 years under Law 16).
• Major interventions necessary to maintain the building’s longevity, when such work does not fall under routine maintenance and is not related to a deficiency correction file.
• Expert assessments leading to major work or the preparation of plans and specifications and site supervision for work eligible for the FDP (facade inspection under Law 122, parking inspection under Law 122, architect or engineer fees for major work).
• Management fees in connection with work subject to the contingency fund
• Cosmetic work (e.g., painting corridors or refurbishing hallways), when provided for in the contingency fund study.

Good to know: sometimes, work will be brought forward in relation to the study or will cost more than expected, but these expenses will still be eligible for the contingency fund since the work was planned in the study. The fact that a parameter of the study (completion date, costs, etc.) is not respected does not make the expense any less eligible.  This is why contingency fund studies must be updated every five years to correct any changes in assumptions based on what has actually happened and thus adjust the contributions to the contingency fund required for the future.

NON-ELIGIBLE EXPENSES

The fund cannot be used for:

• Routine maintenance of common areas (e.g., cleaning, snow removal, lawn mowing).
• Expenses that fall under the operating budget or self-insurance fund, unless specifically included in the study (although you would be better off having them excluded before accepting the report).
• Urgent major repairs related to deficiencies (in our opinion, even if they are major repairs, their unpredictable nature does not make them eligible for the contingency fund).
• The costs of any litigation related to the completion of the work (e.g., legal fees, special assessment collection fees).
• Improvements (e.g., adding a gym, non-essential cosmetic renovations) that must also be approved by a vote of the co-owners’ assembly before being carried out.

When in doubt, always refer to the definition of the contingency fund, which should be used for foreseeable major repairs and replacements.

Thus, even if the replacement of a door handle or a submersible pump is a “replacement,” sometimes the minor nature of the cost incurred should prompt you to record it as an operating cost (administration fund).  In fact, there will always be minor replacements here and there in a building.

To this end, we strongly encourage you to maintain a sufficient budget in your administration fund for periodic preventive maintenance (e.g., cleaning dryer vents, cleaning vertical plumbing columns) as well as an operating budget for normal repairs (service calls and minor replacements) that occur annually.

PRACTICAL TIPS TO AVOID MISTAKES

1. Consult the fund study before making any decisions: it is your guide.
2. Do not confuse contingency fund with administration fund: each has its own role.
3. Communicate clearly with co-owners: explain why certain expenses are not eligible for the contingency fund.
4. Update the study every 5 years (legal requirement – Act 16).
5. If in doubt, consult a professional to avoid misinterpretation.

IN CONCLUSION

The contingency fund study is a planning tool.  This fund is not a solution for all major expenses or for recording expenses in order to avoid a deficit in your administration fund.

Complying with its legal framework, but also with the provisions of the study carried out every 5 years by professionals, protects your condominium and avoids potential financial conflicts, especially with new buyers.