Quebec hesitated for a long time, but finally published Bill 16, which will profoundly transform the operation of condo buildings in Quebec.
For some less well-off owners, including many retirees, there is a fear that these changes will force them to sell, or at least heavily remortgage, their condo.
In some cases, some older people will realize that they simply can no longer afford to live in a condo. Where will they go in today’s market?
Tricky question.
How does it work?
When you buy an apartment in a building, you are responsible for your own square footage, but also for what we call common areas. The corridors, the roof, the garage, the masonry, the windows… depending on the co-ownership regulations, this covers more or less everything that is not in your unit.
Every year these “common areas” deteriorate; it is therefore normal for the people who live there to set aside a small amount to cover this deterioration.
But for decades, through a strange hole in the law, there has been virtually no regulation of these obligations. So much so that people who live in certain buildings do not pay their fair share of the deterioration.
This new law, which requires co-owners to assume their responsibilities, will not be without consequences. New fees, estimated in thousands of dollars, will be added to the costs of ownership of this type of housing in Quebec.
And it will start very soon.
Strong increases in sight
Although some details remain to be clarified, the law mainly provides for three things.
First, it will be mandatory for co-owners to have the condition of their building analyzed by an independent expert (engineer, architect or other assessor) and to anticipate all work, repairs and replacement to be planned.
Then, depending on the results of the analysis, you will have to contribute to a contingency fund.
If the expert says that you need $800,000 in five years, you should put this amount aside, year after year, to reach this amount at maturity.
Last obligation, it will be necessary to provide any new buyer with a complete and detailed certificate on the state of the co-ownership. This will undoubtedly scare many buyers. And will lower the value of properties with insufficient funds.
According to Julien Gobeil Simard, Managing Director of Hoodi, a firm specializing in the analysis and monitoring of these analyses, more than 9 out of 10 co-owners currently do not have the necessary funds to cope with mandatory maintenance.
To compensate, several buildings will see their condo fees increase rapidly. In some cases, double, or more.
What does this mean for you?
If you live in a building that has next to nothing in its contingency fund, prepare for the worst. Sorry to be pessimistic, but prevention is better than cure.
Because those who have accumulated practically nothing over the years will still have to pay for the repairs… but in the form of special contributions. Before the roof collapses, its replacement may represent, in certain contexts, a charge of $5,000, $10,000, $25,000 or more per co-owner, payable in the same year.
For those who bought 20 years ago, at the price of 20 years ago, such a special contribution is almost unimaginable. This is especially true for retirees who live on fixed incomes and limited savings.
In many cases, they will be forced to go to the bank to remortgage, or obtain a second mortgage. In the worst case scenario, faced with these new rules, they will have no other choice but to sell their residence and move.
