Post-Loss Code Compliance in a Quebec Condo: Who Pays?

A major water leak, fire or electrical failure can force reconstruction and trigger code compliance work. In a divided co-ownership, the same question always comes up: who pays the bill in Quebec? Between the syndicate’s insurance, each co-owner’s individual insurance, the deductible, common expenses and special assessments, the answer depends on the nature of the damage, the portions affected (common or private) and the requirements of the Building Code.

This article guides you through the usual responsibilities, the role of the board of directors and best practices for limiting the financial impact of post-loss code compliance work.

The legal and insurance basics in Quebec

• The syndicate must insure the building for its reconstruction value, including the common portions and private portions, excluding improvements made by co-owners. This obligation arises from the provisions of the Civil Code of Quebec (C.C.Q.) concerning divided co-ownership. Reference: LégisQuébec – C.C.Q..
• The declaration of co-ownership must include a description of the standard unit. Anything beyond the standard unit (improvements) falls under the co-owner’s insurance.
• The syndicate must establish a self-insurance fund to cover, among other things, the deductible and certain damage not indemnified by the insurer. This fund is separate from the contingency fund, which is intended for major repairs and the replacement of common portions.
• Loss management and technical and financial decisions fall to the board of directors, which acts in the syndicate’s interests, documents its decisions in the minutes and, where necessary, consults the meeting of co-owners for the required approvals, particularly if a special assessment is necessary.

In practice, the syndicate’s insurer indemnifies repairs needed to restore the building to its original condition (the standard unit), subject to the policy’s coverage and exclusions. Code compliance work required by the Building Code may be covered in whole or in part if the policy includes coverage for “additional costs arising from by-laws” (often called ordinance or law coverage). Otherwise, these costs become expenses of the syndicate.

What does “code compliance” mean after a loss?

Code compliance means the additional work required to ensure that reconstruction meets the current requirements of the Quebec Construction Code/Building Code. For example:

• Upgrading a fire alarm system or sprinkler system that has become insufficient under current regulations;
• Adding compliant fire separations or fire-rated doors;
• Bringing electrical systems (breakers, grounding) or plumbing systems (ventilation, backflow preventers) up to code;
• Accessibility adaptations or structural corrections required during significant reconstruction.

These requirements depend on the extent of the loss and the scope of the work. Some code compliance work applies only to the damaged area; other work requires a broader intervention. For an overview of the applicable rules and codes in force, consult the RBQ – Quebec Construction Code.

Important: work such as asbestos removal or decontamination relates to health and safety and may be covered differently from simple compliance improvements. Always check the syndicate’s policy wording and the experts’ reports.

Who pays for what? Common scenarios

Every loss has its own particularities, but these principles help guide the allocation of costs.

1) Damaged common portions

• Damage to the common portions (e.g., the structure, corridors, roofs and risers) is generally indemnified by the syndicate’s insurance, less the deductible.
• Code compliance costs required to reconstruct the affected common portion may be covered if the policy provides appropriate coverage for “costs arising from by-laws”. If not, these additional costs are common expenses and may lead to a special assessment.
• If the insurer refuses part of the costs (because of an exclusion or policy limits), the balance is assumed by the syndicate. The deductible may be paid from the self-insurance fund. Depending on the by-laws of the immovable and the provisions of the C.C.Q., some or all of the deductible may sometimes be charged to the co-owner concerned by the triggering event, subject to strict conditions and depending on fault or the applicable rules. Refer to the relevant provisions of the C.C.Q. and your by-laws.

2) Private portions and improvements

• Damage to the standard unit of a private portion is, in principle, covered by the syndicate’s insurance. Improvements (high-end countertops, luxury flooring) fall under the co-owner’s insurance.
• Code compliance work inside a damaged private portion may follow the same logic as for common portions: if the syndicate’s policy covers additional compliance costs, it may respond for the “standard” portion. Additional costs related to improvements must be assumed by the co-owner’s insurer, if they are insured.

3) Undamaged elements affected by the code

A common situation is one in which a loss forces the modernization of a system (e.g., a fire alarm system) in one area, but the code requires the entire building’s system to be brought into alignment, including unaffected areas. Depending on the policy, the “increase in construction cost related to by-laws” may cover only the portion directly related to the damage. The rest becomes an expense of the syndicate and, where necessary, a special assessment. This grey area must be assessed with the claims adjuster, engineer or architect and insurance broker.

4) Deductible and allocation

• The deductible is an expense of the syndicate and should be funded through the self-insurance fund. Do not use the contingency fund to pay a deductible, since that fund is reserved for major repairs and the replacement of common portions.
• The allocation of the deductible among co-owners may be governed by the by-laws of the immovable and the C.C.Q. In some cases, the co-owner whose unit caused the loss may be required to assume it, depending on the applicable rules. Before charging a deductible, verify the legislation in force and obtain professional advice if necessary.

For practical guidance and industry best practices, also see the RGCQ – Regroupement des gestionnaires et copropriétaires du Québec.

Claims process: the board’s role and key decisions

Here is a typical process for a well-equipped board of directors after a loss:

1. Emergency measures and reporting: secure the premises, retain licensed contractors (RBQ), notify the insurer and document everything.
2. Expert assessment and estimates: obtain an expert or engineer’s report detailing “like-for-like” repairs and the required code compliance work. Refer to the maintenance logbook / EUC to plan the interventions and check which elements have already been identified through preventive maintenance.
3. Insurance coverage: confirm with the broker the clauses covering “costs arising from by-laws”, the limits and exclusions, then determine what is and is not indemnified.
4. Calls for bids: request comparable bids, with clear technical specifications and RBQ requirements. Take into account the impact on the common portions and private portions.
5. Decisions and governance: record the resolutions in the board’s minutes. If a special assessment is required (e.g., for an uncovered portion of the code compliance work), call an annual general meeting or a special meeting in accordance with the declaration of co-ownership, and communicate the estimate, schedule and impact on condo fees transparently.
6. Work follow-up: quality control, certificates of compliance, updates to the maintenance logbook/EUC and the declaration of co-ownership as needed (particularly the standard-unit description if clarification is required).

To equip your board of directors, see our Services pages: administrative management, financial management and operations management.

Reducing the financial impact of code compliance work

• Review the master policy: ensure that coverage for “costs arising from by-laws” is included with adequate limits. An annual review with the broker is recommended.
• Clearly describe the standard unit in the declaration of co-ownership and keep an up-to-date inventory of improvements. This helps prevent disputes and claim delays.
• Fund the self-insurance fund at a level consistent with the deductible and historical loss experience. Avoid increasing the deductible without having the financial capacity to assume it.
• Maintain an active maintenance logbook / EUC and a preventive maintenance program. Fewer failures mean fewer losses and fewer forced code compliance upgrades.
• Update the by-laws of the immovable concerning the possible allocation of the deductible and co-owners’ obligations (inspection of water heaters, valves, etc.).
• Train the board of directors on legal obligations relating to co-ownership. Good governance reduces costs and delays.

For additional legal information on divided co-ownership and insurance, consult the Civil Code of Quebec and the RBQ portal. For tax issues related to renting out a condo, see Revenu Quebec – Expenses related to a rented property.

FAQ – Code compliance and condo losses

Q1. Can the contingency fund be used to pay the insurance deductible?

A. No. The contingency fund is reserved for major repairs and the replacement of common portions. The deductible should be covered by the self-insurance fund or, depending on the applicable rules, allocated otherwise in accordance with the declaration of co-ownership and the C.C.Q.

Q2. If code compliance requires upgrading an entire undamaged system, will the insurer pay?

A. Insurance often covers the cost increase directly related to the damaged portion, if the policy includes this coverage. Bringing unaffected portions into alignment is frequently the responsibility of the syndicate, and is therefore paid through common expenses or a special assessment.

Q3. Are special assessments related to a loss tax-deductible?

A. For a condo occupied for personal purposes, generally not. In the case of a rental, certain expenses related to rental income may be eligible. Confirm your situation with Revenu Quebec.

For more practical guides, browse the multiRent blog.

This article provides general information and does not constitute legal advice. Consult a lawyer or notary regarding your situation.

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