On June 13, 2018, Quebec's National Assembly passed Bill 141. In doing so, it amended article 1070 of the Civil Code of Quebec. The amendment requires syndicates to keep available to co-owners a sufficiently precise description of the private portions, so that any improvements made to their units can be identified. This gave rise to a new concept in the world of condominium syndicates: the reference unit. A few questions will help illustrate it. What is it? What does it involve? How do you describe it? What exactly do you describe? How many reference units should be described? And who can do it?
What the law says
The adoption of Bill 141 by Quebec's National Assembly brought various changes to the Civil Code of Quebec across several areas. The ones of interest here concern condominium co-ownership. We will look at two articles, namely article 1070 and article 1106.1 of the Civil Code of Quebec. Here is what each one says. Article 1070 of the C.C.Q. reads as follows:
1070. The syndicate keeps available to the co-owners a register containing the name and address of each co-owner and each lessee, the minutes of the meetings of the co-owners and of the board of directors, and the financial statements.
It also keeps available to them the declaration of co-ownership, copies of the contracts to which it is a party, a copy of the cadastral plan, the plans and specifications of the immovable as built, where applicable, and any other document relating to the immovable and the syndicate.
Finally, the syndicate keeps available to the co-owners a description of the private portions that is sufficiently precise for the improvements made by the co-owners to be identifiable. A single description may apply to several portions where they share the same characteristics.
This article specifies that syndicates must make available to co-owners a description of the private portions precise enough for a co-owner to identify the improvements made to their unit. This description had to be produced and approved by the meeting of co-owners no later than June 13, 2020, for co-ownerships established before June 13, 2018.
The second applicable article is 1106.1 of the C.C.Q., which reads as follows:
1106.1. Within the following 30 days, the special meeting of the co-owners, the developer must provide the syndicate with the description of the private portions provided for in article 1070.
This article specifies that developers must provide the syndicate with a description of the private portions within 30 days of the special meeting of co-owners. It applies to co-ownerships established after June 13, 2018.
What does it involve?
A description of the private portions is required, but what does that actually involve? The article is not particularly specific, which creates some uncertainty about the method to use and about what must be described. The purpose behind the description of the private portions is to establish the standard originally provided by the developer. This means everything the developer included at no extra cost. For example, if the flooring originally offered in a building was carpet, that is what should be recorded on the description sheet, even if one or more owners have since replaced the flooring in their unit. The description also serves to determine the standard used to prepare the building's insurable value report.
How do you describe it?
The unit must be described using the original finishes provided by the developer, without options or improvements. But how? In older co-ownerships, determining the finishes originally offered by the developer often proves very difficult. That information may well have been lost over the years. To begin, try to locate the unit that has undergone the fewest renovations since the co-ownership was created. That is the unit to start with. Then ask whether any elements have been added or improved in that unit since it was purchased. An example of an addition would be an air conditioner where the other units have none. An improvement would be replacing one material with another of higher quality. Replacing an old carpet with another carpet of equal value would not be considered an improvement. Each element that has been added or improved should be described not as it appears when the sheet is prepared, but as it would have been originally. In addition to on-site observations, you can also reach out to other co-owners to check whether they hold documentation describing the standard finishes and the various options the developer offered when the units were first sold.
If, in an older building, it becomes impossible to determine the original finishes provided by the developer, the syndicate may create its reference unit from scratch. In such a case, in our view, the syndicate could meet and describe a base unit that comes as close as possible to the full set of existing units. It would carry out the same types of descriptions discussed below. The reference unit created by the syndicate must also be approved by a vote of the co-owners.
Creating a reference unit that is too luxurious relative to reality would drive up the syndicate's insurance premiums, because that standard is what is taken into account when preparing the insurable value report. The value of the building assessed would then be overstated, raising insurance premiums.
What do you describe?
Each finish present in every room of the unit must be described, as precisely as possible. For example, you describe the finishing materials for floors and ceilings, the types of doors, light fixtures, woodwork, heating and plumbing fixtures, built-in furnishings (included in all units), and so on. You must describe not only the material used, but also its quality. By quality, we mean determining the range the element falls into (entry-level, mid-range, high-end or luxury).
How do you record it?
Once again, the law is vague and provides no method or format for describing the reference unit. Syndicates have various options. In our view, they may use multimedia such as photos or video. Where a photo album is created, notes can be added to produce a highly visual description of the reference unit. Another option is to record a video of the reference unit in which the various elements are commented on as the recording is made.
To help managers and syndicates meet their obligation, the Regroupement des Gestionnaires et Copropriétaires du Québec (Quebec Association of Managers and Co-owners) created a document for describing a reference unit. A syndicate may use this document, or draw on it, to develop its own description sheet. Creating a description sheet is a preferred method in the appraisal field.
Our own office chose to use a description sheet report for the common portions, comprising one sheet per room visited along with a photo gallery to illustrate the materials described. On this sheet, we record the results of our research into the materials used originally when the private units were built. We describe the material, assess its quality, add any supplementary notes about it, and include photos to illustrate the various materials and finishes described. The whole is presented as a report that the syndicate can bring to its members for adoption.
How many reference units should be described?
A single reference unit needs to be described when all units share a similar finish. However, if there is one standard finish for units on floors 1 to 10 and another standard for the units on the top floor, then two reference units should be created.
Since the law is fairly vague about how to describe a reference unit, it is equally vague about how many to describe. That said, the number of rooms in a unit, or its area, should not be a factor dictating the need to create more than one reference unit. Because the reference unit serves to determine the type of materials used and their quality, the number of rooms does not change the overall finish of the unit. In the event of a loss affecting your building, the insurer will indemnify the units based on their original condition and their original number of rooms. For example, if the building comprised six 4½ units and four 5½ units, the insurer will replace it with a building of the same unit typology. The same reasoning applies to the square footage of the units. Only units with improvements or options might not be rebuilt in the same way, if the owner has not insured them properly.
Who can do it?
Members of the syndicate can produce the description themselves if they feel comfortable with this type of work. If they do not feel comfortable, they can turn to a professional who can complete the sheet for them. They then simply need to have it approved at a meeting for it to be adopted. Chartered Appraisers, in particular, can assist with this type of mandate. Since they are also the resource professionals for producing insurable value reports for condominium buildings, they are well placed to determine what should be included in or excluded from the description of the private portions.
After adoption
Once the syndicate has completed the process of creating the reference unit, each co-owner must review it and compare their own unit against it. Their task is then to determine whether their unit includes options or improvements not reflected in the base description. If so, they must notify their personal insurer so that these additional options or improvements are covered.
Indeed, the condominium syndicate must insure the building in its original condition, without improvements. These unit improvements must not be taken into account when establishing the building's replacement value. Only the finishes originally offered by the developer are considered. Improvements made to the various units by their owners must be insured by those owners through their personal insurance. This is in keeping with article 1073 of the Civil Code of Quebec, which reads as follows:
"The syndicate has an insurable interest in the whole of the 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 value of the immovable. It shall also take out third person liability insurance."
This must be done to avoid unpleasant surprises for co-owners in the event of a loss, since the insurer would only replace the standard finishes originally offered by the developer. A Chartered Appraiser can also help you prepare a report on your unit's improvements relative to the reference unit.
In summary, if you live in a co-ownership established before June 13, 2018, you had until June 13, 2020, to describe your reference unit and have it adopted at a meeting. For those whose co-ownership was established after that date, your developer has 30 days following the special meeting to provide you with a description of the private units. Once your reference unit has been adopted by your condominium syndicate, each co-owner will need to check for any options or improvements that differ from the reference unit. They must then have these insured through their personal insurer, so as to avoid unpleasant surprises in the event of a loss.