Condo Fees Allocation: Who Pays for a Terrace with Exclusive Use?

As many condominium syndicates begin setting up their administrative structures, the issue of allocating costs related to limited common elements raises many questions. This is particularly true when a co-owner has the exclusive use of a rooftop terrace. So, who should pay for major repairs to this part of the building?

In a condominium where the declaration stipulates that the co-owner with exclusive use of a terrace must alone assume responsibility for its maintenance, repair, replacement, and reconstruction, this obligation also applies to major work. But what about their contribution to the contingency fund?

A Legal Obligation to Respect

According to Article 1064 of the Civil Code of Québec, all co-owners must contribute to the contingency fund in proportion to the relative value of their unit. However, there is a nuance when it comes to limited common elements (LCEs):

"Co-owners who have the use of limited common elements contribute alone to the costs related to the maintenance and minor repairs of these elements."

The declaration of co-ownership can also state that these same co-owners must bear alone the cost of major repairs and replacement of the affected components. In such cases, a specific contribution to the contingency fund is not only legitimate but necessary.

Should a Separate Fund Be Created?

On this question, condominium management experts are clear: opening a separate bank account for each type of LCE is not recommended. Such a measure would unnecessarily complicate the syndicate’s financial management. A rigorous accounting approach is preferred—it allows for a clear and transparent breakdown of the amounts allocated to major repairs, while ensuring a fair distribution of costs.

Recommendations for Effective Management

The board of directors is encouraged to adopt certain best practices to ensure sound management:

• Integrate these specific contributions into the accounting of the contingency fund using a restricted fund or deferral method.

• Provide a detailed breakdown of these amounts in the financial statements to ensure transparency and understanding.

• Issue a precise assessment notice to the concerned co-owners, indicating their portion dedicated to major repairs of the LCEs.

The Crucial Role of the Contingency Fund Study

When a contingency fund study is commissioned, it is essential to include a breakdown of costs related to LCEs. The professional in charge of the analysis must:

• Identify and isolate the components with exclusive use;

• Prepare separate financial forecast tables for each LCE;

• Detail the required contributions based on each co-owner’s usage rights.

The board should ensure this breakdown is included in the professional’s mandate.

Real Legal Risks

An insufficient or poorly structured contingency fund could expose the syndicate and its board members to legal action. Under Article 1072 of the Civil Code, the board of directors must determine annual contributions from co-owners after consulting the assembly, and these amounts must include what is required for the contingency fund.

Failing to provide for specific contributions for LCEs, when the declaration requires it, could be seen as a breach of this obligation—or even negligence.

In Summary

Contributions to the contingency fund are not limited to general common areas. When a co-owner has exclusive rights to a portion of the building, such as a terrace, they must also contribute—alone—to the cost of major repairs and replacements, if stipulated in the declaration of co-ownership.

Rigorous accounting, a clear allocation of expenses, and a well-structured contingency fund study are key to minimizing risks and ensuring the financial sustainability of the building.