One fine morning, you receive a request from a real estate broker regarding a request for information for the sale of a condo in a co-ownership that is part of the Co-ownership Syndicate (SDC) of which you are an administrator. You are asked to quickly fill out the DRCOP form — Request for information from the co-owners' syndicate as you usually do, but you are also asked to fill out a Certificate from the syndicate on the state of the divided co-ownership this time. Do you have all the financial information on hand to complete these two documents? Here are some tips to help you in 10 points.
5 WAYS TO IMPROVE OPERATIONAL MANAGEMENT:
- Master your declaration of co-ownership (DDC) and its regulations
Several answers can already be found in the DDC and its regulations, including:
a- The period covered by the payment of condo fees
b- Additional fees for the exclusive use of a common area
c- Regulations adopted or that could be adopted and recorded in the co-ownership register in addition to the provisions of the co-ownership
- Insure the building according to the latest reconstruction cost assessment or indexing letter
- According to article 1073 of the Civil Code of Quebec, the reconstruction cost of a building managed by the SDC must be evaluated every five years by a certified appraiser. You will need to provide the following information:
a- The insurance policy
b- The replacement value established or certified by a qualified professional
c- The amount of the highest deductible provided by the insurance policies taken out by the syndicate
The insurer may request an indexing letter or perform its own calculation for the increase in value between the evaluation dates.
- Conduct the study of the contingency fund before August 14, 2028:
- How much should be budgeted for the contingency fund? If no contingency fund study is conducted, the minimum contribution is at least 5% of the condo fees in the absence of a study. If a contingency fund study is conducted, you must indicate the recommendation of the study regarding the amount that should be available in this fund at the beginning of the current year.
By conducting your contingency fund study before the mandatory entry date, you:
Ensure the availability of a supplier
Avoid paying too much in the year it becomes mandatory (too many requests compared to the number of available suppliers)
- Determine a more reliable contribution amount to the contingency fund than the arbitrary amounts indicated in the Civil Code of Quebec that may not be representative of the value of future work.
- Create the maintenance log before August 14, 2028, and follow up on the work:
- You will need to indicate the following elements:
- a- Inspections and assessments carried out at the initiative of the union in the last 5 years, focusing on the general condition of the building or one of its main components;
b- Major repairs and replacements made to the common areas in the last 5 years, including the date of these works and their cost;
c- What will the works be in the next 10 years? It is difficult to quantify if you are not an engineer, a certified appraiser, an architect, or a professional technologist. These professionals can prepare the maintenance log and inform you of the major repairs and replacements planned for the common areas over the next 10 years, as well as the estimated date and cost of these works.
- Document the minutes during meetings thoroughly
- Several requested pieces of information can be found in communications, including:
- 1. Amount and due date of the contributions
a. Voted contributions that are not yet due
b. To be anticipated
2. Ongoing disputes involving the union that are subject to court proceedings;
a. Legal proceedings
b. Ongoing negotiations or arbitration proceedings
c. Notices sent against the union or by it against a third party or a co-owner
d. Judgments rendered pending execution
3. Compensation payable to the fractions subject to sale
4. Notices sent or about to be sent in violation of the seller resulting in repercussions for the buyer
5. Work done in the private area that affects the common areas and for which authorization should have been granted
6. Factors related to the building that could significantly decrease its value or increase expenses
7. Extraordinary decisions regarding renovation, expansion, or improvements to the common areas in the last two years
8. Incidents that affected, in the last 5 years, the private area being sold or the common areas of the building
9. Changes made in the last 3 years to the declaration of co-ownership
5 WAYS TO IMPROVE YOUR FINANCIAL MANAGEMENT
Always have up-to-date accounting
Several questions are raised regarding condo fees to determine if there are any arrears, prepare adjustments to the distribution memorandum with the notary, or determine future costs to be incurred for the future co-owner.
- By keeping your accounting books up to date by reconciling various transactions once a month, you will be able to answer all questions regarding:
- Condo fees :
- Date when the last payments were made
- Amount required annually over the last 3 years
- Amount paid annually over the last 3 years
- Fund balances :
- Administration (liquidity to pay current expenses)
- Self-insurance
- Planning
- Everything can be prepared with a spreadsheet or accounting software, considering the volume of transactions and the size of the co-ownership.
2. Prepare financial information according to fund accounting
- Financial information includes, in particular, the balance sheet, the income statement, and a statement of debts and receivables. You will need to provide the amount of the annual surplus or deficit from the last 3 financial statements. For internal management purposes, fund accounting allows for better control over resources allocated in the financial statements for specific purposes. By presenting balances by fund, it allows for distinguishing operations between different funds:
Administration
Self-insurance
Planning
Other mandatory funds according to your DDC
Other established funds (e.g.: contingencies)
3.Keep information up to date with the Quebec Enterprise Registrar (REQ)
- The business number can easily be found by searching by name in the REQ. You can consult the registration and make necessary changes through annual or current updates (e.g.: end or start of a director's term).
- You will need a valid piece of identification including the date of birth (e.g.: passport, driver's license, valid provincial health insurance card) to make a change to the directors.
4.Know your financial year-end and file your tax returns within the prescribed deadlines.
- The SDCs must file annual income tax returns within 6 months after the end of their financial year, but what is that date? It can be found in your co-ownership declaration or you can make the choice during the first financial year.
- The Revenue Agency of Quebec (ARQ) can impose penalties for non-filing of $25 per day, up to a maximum of $2,500.
- In order to complete the income tax returns, the SDC will need to have 3 accounts:
- Quebec Enterprise Number (NEQ): 10 digits according to the REQ
- Federal Business Number from the CRA (NE): 9 digits and RC0001
- Provincial Identification Number from the ARQ (NIQ): 10 digits and IC0001
- Registration with the CRA and ARQ can be done online by the administrators.
- A president, secretary, treasurer, or vice-president can grant online access to My Business File for the CRA and ARQ to an authorized representative (e.g., Chartered Professional Accountant [CPA]) for the preparation of income tax returns if this task is outsourced.
5.Prepare a realistic complete budget
- Having conducted the study of the contingency fund, you will have determined the amount for contributions to the contingency funds, but what about the self-insurance fund and the administration fund?
- According to Article 2 of theRegulation establishing various measures regarding the insurance of divided co-ownerships, the self-insurance fund must contain the amount of the highest deductible, except for that for earthquake or flood. If an amount is used, the balance should be reimbursed over a maximum of two financial years, depending on the amount used.
- The expenses of the administration fund can be determined in various ways. For example, they can be based on the last fiscal year if they are representative of the future, on bids obtained, or on estimates of the expected expenses for the following fiscal year, or on provisions for the future.
- You will need to provide this budget, which may be accompanied by a table of monthly contributions for each unit, for the current financial year. This will indicate:
- Monthly amount of condo fees
- The operating deficit or surplus with explanations