Why is the contingency fund study projected over 25 years? (Quebec)

The 25-year horizon isn't arbitrary. It's a compromise between two conflicting demands — seeing far enough ahead to anticipate major replacements, without slipping into pure speculation about costs that can't be reliably estimated.

The 25-year logic

A divided co-ownership in Quebec must be able to fund replacement of its common elements at the moment they reach end of useful life. The study horizon must therefore encompass at least one full rotation of the most expensive components.

The regulation adopted under decree 991-2025 sets this minimum at 25 years (art. 3 for the maintenance logbook and art. 7 for the contingency fund study) — exactly the window in which most structurally and mechanically important components will have been touched at least once.

Typical components on this horizon

To understand why 25 years, just look at the typical useful life of common-element components:

Over 25 years, most of these components will have been touched once and several twice. That's the horizon at which the fund's financial health becomes legible.

Why a shorter horizon wouldn't suffice

A 10-year horizon would mask most costs. No roof gets replaced in the first 10 years after installation; no elevator cab either. A fund calibrated on 10 years would seem sufficient while accumulating massive deficit for years 11 to 25.

A 15-year horizon is better but still inadequate: it misses the first full rotation of the building envelope and major mechanical systems.

Why 25 years and not 30 or 50

Conversely, lengthening the horizon beyond 25 years introduces two problems:

1. Speculation on costs — projecting the price of a new roof in 2055 requires inflation assumptions no one can confidently maintain.
2. Diminishing returns — beyond 25 years, each additional year adds little actionable information. The syndicate isn't really planning its 2055 budget today.

Twenty-five years is the equilibrium point between covering main cycles and keeping estimates precise.

How the study handles inflation

A good contingency fund study isn't a simple sum of current costs. It models:

• Construction-cost inflation — typically between 2 and 4% per year depending on conditions, applied to each future projected cost.
• Expected return on the fund balance — if liquidity is invested (GICs, money-market fund), returns offset part of the inflation.
• Possible contribution increases — the scenario must show how contributions evolve to keep the fund sufficient at each year of the projection.

Assumptions must be documented explicitly in the report. A study that doesn't specify its inflation rate or expected return is incomplete.

Five-year review: what gets updated

The 25-year horizon isn't fixed forever. The regulation requires a review every 5 years. At each review:

• The component inventory is updated (recently completed work, new components, problems revealed).
• Remaining useful lives are reassessed against observed wear.
• Replacement costs are updated to current market.
• The projection is extended 5 years into the future — each review shifts the 25-year horizon so it stays at 25 years from the current date.

The syndicate therefore permanently has a 25-year forward view, never less. This rolling-forward mechanism is what makes the fund a genuinely useful planning tool.

Practical consequences for the syndicate

A 25-year horizon means gradual contribution increases anticipate expenses that seem distant today. This is politically uncomfortable — a co-owner who has lived in their unit for 8 years can argue they won't be there when the roof gets replaced. But the study forces the honest conversation: if the fund doesn't absorb long-term costs, it's the future owners (including current co-owners who want to sell) who inherit the deficit, either via a special assessment or via a price discount on their unit.

That's exactly what Bill 16 is meant to prevent: an aging Quebec co-ownership stock with chronically underfunded reserves and surprise special assessments.