Article 1071.1 C.C.Q., A concept every co-ownership owner should know.
Do you live in a divided co-ownership? Here is a concept every co-owner should know. Since the 2020 reform (Bill 16), the Civil Code of Quebec requires co-ownership syndicates to establish a self-insurance fund, separate from the contingency fund and the operating fund. This fund is used to cover the syndicate's insurance deductibles and losses not covered by its insurance policy.
The law provides for the establishment of the self-insurance fund under article 1071.1 of the Civil Code of Quebec. The syndicate is responsible for establishing this fund and ensuring it remains liquid and available in the short term in the event of a claim.
WHAT ARE THE FUNDS USED FOR?
The self-insurance fund is primarily used for two distinct purposes:
- The payment of deductibles provided for under the insurance policies subscribed by the syndicate (art. 1071.1 para. 2 C.C.Q.)
- The repair of damage to property in which the syndicate has an insurable interest, as well as the payment of any unforeseen expenses, when the contingency fund, the operating fund, or an insurance indemnity cannot provide for such repair (art. 1071.1 para. 3 C.C.Q.)
The deductibles covered by the self-insurance fund are not necessarily limited to building insurance; they may also relate to the civil liability insurance of the directors or the syndicate.
HOW MUCH MUST BE CONTRIBUTED?
The government published in the Regulation establishing various measures respecting insurance of divided co-ownerships the specific rules governing each co-owner's contribution to the self-insurance fund. The contribution is established annually, alongside the determination of amounts to be paid into the contingency fund, according to one of three situations (art. 2 of the Regulation):
| Fund situation | Required contribution | Example |
| Capitalization ≤ 50% of the highest deductible | The contribution equals half of that deductible | Deductible of $50,000, fund at $12,000 → contribution of $13,000 |
| Capitalization > 50% of the highest deductible | The contribution equals the difference between the deductible and the current capitalization | Deductible of $50,000, fund at $27,000 → contribution of $23,000 |
| Capitalization ≥ the highest deductible | No contribution required | — |
WHAT MUST THE SYNDICATE DO?
Under article 1071.1 C.C.Q., the syndicate must:
- Establish this fund separately from the other funds
- Fund it through contributions from co-owners
- Use it exclusively for deductibles and uninsured losses
- Ensure the funds are liquid and available on short notice — unlike the contingency fund, the self-insurance fund is not required to be guaranteed
The amount to be contributed is determined based on the replacement value of the building and the deductible amounts provided for in the insurance policy.
Good to know. This fund is separate from the contingency fund (replacement and major repairs) and the operating fund (current expenses). It must be administered separately and cannot be used for any other purpose. The contingency fund study carried out by a professional must now take this obligation into account.
FINAL NOTE
Co-ownership is much more than buying a condo. It also means understanding the financial mechanisms that protect your investment. The self-insurance fund is your collective safety net against the unexpected: without it, a single high insurance deductible could translate into an unexpected special assessment for all co-owners.
Whether you are a buyer, a co-owner, or a syndicate board member, understanding this mechanism allows you to better assess the financial health of your co-ownership and anticipate risks before they become problems.
Where to start?
If you need assistance with the purchase of a condominium or are a co-owner wishing to exercise your legal rights, consult your lawyer or contact us at Fiset Légal for legal advice in real estate and condominium law.
Understanding your collective funds means protecting your investment.
