On June 13, 2018, the National Assembly of Quebec passed Bill 141. In doing so, Article 1070 of the Civil Code of Quebec was amended. The amendment requires condominium syndicates to keep at the disposal of the co-owners a description of the private portions that is sufficiently precise to allow for the identification of any improvements. This introduced a new notion to the condominium syndicate world: the “reference unit.” To illustrate the concept, let us address the following questions: What is it? What does it include? How can we describe it? What do we need to describe? How many standard units do we need to describe? Who can do it?
What Bill 141 Says
The passing of Bill 141 by the National Assembly of Quebec brought about several changes in many different sections of the Civil Code of Quebec. The sections that we are interested in are those pertaining to condominiums. We’re going to examine Article 1070 and Article 1106.1 of the Civil Code of Quebec. Let’s look at the text of the two articles. Article 1070 of the CCQ reads as follows:
1070. Among the registers of the co-ownership, the syndicate keeps at the disposal of the co-owners a register containing the name and mailing address of each co-owner; the register may also contain other personal information concerning a co-owner or another occupant of the immovable if he expressly consents to it. In addition, the register contains the minutes of the meetings of the co-owners and of the board of directors, the resolutions in writing, the by-laws of the immovable and any amendments to them, and the financial statements.
The register also contains the declaration of co-ownership, the copies of the contracts to which the syndicate is a party, a copy of the cadastral plan, the plans and specifications of and location certificates for the building if they are available, the maintenance log, the contingency fund study and all other documents and information relating to the immovable and the syndicate or prescribed by government regulation.
In addition, the register contains a description of the private portions that is sufficiently precise to allow any improvements made by the co-owners to be identified. The same description may be valid for two or more portions having the same characteristics.
This article specifies that syndicates must provide co-owners with a sufficiently precise description of private portions so that a co-owner can identify any improvements made to their unit. Said description must be produced and adopted by the assembly of co-owners on June 13, 2020, at the latest for condominiums established prior to June 13, 2018.
The second article that applies is Article 1106.1 of the CCQ, which reads as follows:
1106.1. Within 30 days of the special meeting, the developer shall provide the following to the syndicate:
(5) the description of the private portions provided for in Article 1070.
This article specifies that developers must provide a description of the private portions to the syndicate within 30 days of the special meeting of co-owners. This article applies to condominiums established after June 13, 2018.
What Does It Include?
The law specifically refers to a “description of the private portions,” but what does that include? The legislation is not very specific and is a vague regarding the method that should be used to describe the reference unit and what needs to be described. The intent of the description of the private portions is to be able to establish the standard originally delivered by the developer. This refers to everything supplied by the developer at no additional cost. For example, if the flooring was initially carpet, this is what you would include in the description, even if one or several owners have replaced the carpet by a different type of flooring in their unit. The description also determines the standard used when writing the condominium’s insurable value report.
How Can We Describe It?
You have to describe the unit with its basic original finishes provided by the developer, without any optional finishes or upgrades. But how can you do that? Most of the time with older condominiums, it is very difficult to determine the original finishes provided by the developer. The information has often been lost over the years. To start, try to find the unit that has had the least renovation work completed since the condominium building was built. You need to start working from this unit. Then, you need to investigate if any work has been completed to add to or improve the unit since its purchase. For example, an addition would be an air-conditioning unit, if the other units in the condominium do not have one. An improvement would be replacing one type of material with a higher-quality material. Replacing old carpet with new carpet of the same value is not considered an improvement. Anything that has been added to or improved must not be described in its state at the time of writing the description, but rather as it would have been originally. In addition to your on-site observations, you can speak with the other co-owners to see if they have any documentation describing the standard finishes and options the developer was offering at the time of sale.
In the event that it is impossible to determine the original finishes in an older building, the syndicate can create its reference unit from any room. In such a case, we believe the syndicate could meet and describe a base unit that is as close as possible to all units. You must create the same type of description as we will demonstrate further down. The reference unit created by the syndicate must be voted on and approved at a co-owner assembly.
Creating a reference unit that is too luxurious will increase the syndicate’s insurance premium, as the reference unit will be used to write the insurable value report. The building will therefore be overvalued, which will increase insurance premiums.
What Do We Need to Describe?
You must describe all of the finishes in every room of the unit, as precisely as possible. For example, you must describe the finishing materials for the floors and ceilings, the types of doors, the lighting, the woodwork, the heaters, the plumbing, the fixtures (present in each unit), etc. You must also describe the quality of said materials. What we mean here is that you must determine whether the material is low-end, mid-range, high-end or luxury.
How Do We Describe It?
Again, the legislation is vague and doesn’t provide a specific method or framework for describing a reference unit. Syndicates can describe the reference unit in several different ways. We believe that you can use a multimedia approach, such as photos and video. If you create a photo album, you can add notes, creating a very visual description of the reference unit. Another option is to film the reference unit and commentate the video, pointing out and describing the different finishes.
To help administrators and syndicates fulfil their obligation, the RGCQ (Regroupement des Gestionnaires et Copropriétaires du Québec) has developed a template for describing reference units. Syndicates can use this template as is or base their own descriptive files on it. Descriptive files are the method of choice in the appraisal sector.
Our office decided to create a descriptive file of the common areas, this included a file for each room visited and a gallery of photographs illustrating the materials used. In this file, we noted the findings of our research into the standard materials used when the units were built. We described the material, its quality, added additional information about the material, and included photographs to illustrate the described materials and finishes. We presented our findings in a report which the condominium syndicate could present to its members in order for the description to be voted on and accepted.
How Many Reference Units Do We Need to Describe?
When all units have been finished to a similar standard, you only need to describe one reference unit. However, if there is, for example, one standard of finishes for floors 1–10 and a different standard for the 11th floor, you would need to describe two reference units.
The legislation is vague about how to describe a reference unit, and it is also vague about how many units you need to describe. However, it is important to note that the number of rooms or overall square footage of a unit does not constitute a reason for having to describe more than one reference unit. As a reference unit is there to determine the types of materials used and their quality, the number of rooms does not alter the overall finishes of the unit. In the event of significant damages to your building, the insurer will reimburse the units based on their original state and number of rooms. For example, if the building includes six two-bedroom apartments and four three-bedroom apartments, the insurer will replace it with a building containing the same type of units. The same reasoning applies to the square footage of the units. Units with improvements or optional finishes may not be rebuilt to the same standard if their owners have not properly insured them.
Who Can Do It?
If comfortable, the members of the syndicate can create the description. However, if the members of the syndicate do not feel comfortable doing so, they can ask a professional to complete the description for them. Then, they just need to have it voted in and accepted at a co-owner assembly. An accredited appraiser (for example from the Ordre des évaluateurs agréés du Québec) can help. As appraisers also produce condominium insurable value reports, they are able to determine what should be included and excluded from a description of the private portions.
Once the syndicate has created the reference unit, each co-owner must be made aware of it and able to compare their unit to it. They will then have to determine whether their unit has optional finishes or improvements that are not listed in the standard description. If they do, they will need to inform their personal insurance provider to make sure said optional finishes and improvements are covered in their policy.
The condominium syndicate must insure the building in its original state without any improvements. Improvements to units must not be taken into consideration when establishing the building’s replacement value. Only the original finishes provided by the developer must be taken into consideration. Any improvements made to individual units by their owners must be covered on their own personal insurance policy. This is in compliance of Article 1073 of the Civil Code of Quebec, which reads as follows:
“The syndicate has an insurable interest in the whole immovable, including the private portions. It shall take out insurance against ordinary risks, such as fire and theft, on the whole of the immovable, except improvements made by a co-owner to his portion. The amount insured is equal to the replacement cost of the immovable. The syndicate shall also take out third person liability insurance.”
This is to avoid any unpleasant surprises for the co-owners in the event of a disaster, as the insurer will only replace the standard finishes provided by the developer at the time of construction. An accredited appraiser can help you create an improvement report for your unit based on the reference unit.
To conclude, if you live in a condominium which was established before June 13, 2018, you have until June 13, 2020, to create the description of a reference unit and have it accepted at your co-owner assembly. If you live in a condominium that was established after June 13, 2018, your developer must provide you with a description of the private portions within 30 days of your special assembly. Once your reference unit has been accepted by the condominium syndicate, each co-owner must check if their unit contains optional finishes or improvements that differ to the finishes in the reference unit. Then, they must contact their insurance provider and ensure that said optional finishes and improvements are included in their policy, to prevent any nasty surprises in the event of a disaster.
Sébastien Picard, Professional Technologist
HPDG Associés G