10 key questions to understand condominium fund calls
In the world of condominiums, calls for funds play a crucial role, as they ensure the proper functioning and sustainability of a building or development. These regular financial contributions cover ongoing expenses, anticipate maintenance work, and deal with unforeseen events. Without these essential contributions, a condominium would risk becoming paralyzed, unable to maintain the quality of life of its occupants or preserve the value of the property.
Understanding how fund calls work is therefore essential for any co-owner who wants to play an active role in managing their collective assets. Here are 10 questions to help you understand the purpose and functioning of fund calls.
- What is a call for funds in a condominium?
A condominium operates like a small business; it needs funds to ensure its proper functioning. A call for funds is simply the way in which a property manager asks co-owners to contribute to a common budget.
- What are these funds used for?
These funds are used to finance all common expenses for a property, often a condominium building. From cleaning the entrance to repairing the elevator, including building insurance, calls for funds cover these operating expenses inherent in the common use of a property.
Fundraising campaigns are also used to cover unexpected expenses or large-scale projects that exceed the initial budget.These costs may include roof repairs, renovation of the building's facades, updating of common facilities, or other work essential to preserving the value and integrity of the property.
- How is the amount calculated?
Each co-owner participates according to their share in the co-ownership. This share is generally expressed in percentages or thousandths. Obviously, the larger the apartment, the greater the contribution of its owner. The percentages correspond to the share of co-ownership owned by each of the co-owners. The shares of each co-owner are described in the descriptive statement of division (EDD). The distribution of shares may be modified by a vote at a general meeting.
The allocation calculations are based on a principle of proportionality. For each type of expense, the property manager uses the following formula: Total amount of expenses × (Number of shares in the lot / Total number of shares in the entire condominium).
4. Who decides on fundraising appeals?
The issuance of calls for funds is based on decisions made at the general meeting (GM). According to Article 14-1 of the law of July 10, 1965, it is mandatory for co-owners to contribute to current expenses. Article 14-2, meanwhile, regulates calls for funds for exceptional expenses and works. It should be noted that the property manager cannot issue calls for funds without the approval of a decision at the GM, except in the case of urgent works. Each co-owner then receives a document detailing their share to be paid according to their percentage of ownership.
- How often are they issued?
In general, calls for funds are made quarterly or semi-annually. Some condominiums opt for monthly payments. In most cases, the condominium manager makes a call for funds every quarter, i.e., four times a year. The annual budget is set at the beginning of the year, and the amount to be paid by each co-owner is spread over the entire year.
The co-owners thus make four equal payments during the year. An adjustment is made after 12 months. If the provisional budget is not fully used, the surplus paid is carried over to the following year. However, if the budget is exceeded, the property manager organizes an adjustment of the calls for funds and the co-owners must pay the difference.
- Are there different types of capital calls?
Yes, there are two main types of capital calls:
- Calls for routine expenses: these are the day-to-day costs of co-ownership (maintenance, cleaning, minor repairs).
- Calls for extraordinary expenses: for major unforeseen work, such as re-roofing after a storm, for example.
The provisional budget does not cover the costs associated with major works. Consequently, when works such as façade renovation or building insulation renovation are necessary, the amount of the specific call for funds must be approved at the general meeting. During this meeting, the terms of the call for funds and the payment deadline will be determined.
Special expenses should also be distinguished. These include:
- Heating (when the condominium does not have a system that allows for individual heating consumption);
- Costs associated with common facilities (such as elevators, etc.);
- Other public services.
These costs are divided among the co-owners based on whether or not they use the services in question. In this regard, the law of July 10, 1965, amended by the law of December 13, 2000, applies and stipulates: " Co-owners are required to contribute to the costs incurred by collective services and common equipment in proportion to the usefulness of these services and equipment to each lot."Consequently, a co-owner on the ground floor does not necessarily contribute to the elevator costs.
- What is the renovation fund or ALUR fund?
In addition to standard provisional calls for contributions, the ALUR Act requires the creation of aworks fund financed by specific calls for contributions representing at least5% of the annual budget estimate. This is a reserve intended to finance future works.
- What is the deadline for paying the various calls for funds?
Co-owners must pay their assessments within one month of receiving the letter, using various payment methods: direct debit, bank transfer, or check. Some property managers apply late payment interest from the first day of delay.
Each co-owner is free to contest a call for funds and may contact the property manager to request clarification on any expenses that seem unclear.
- In the event of a change of co-owner, who pays what?
Article 6 of the decree of March 17, 1967 specifies that the purchaser becomes liable for charges from the date of receipt by the property manager of the notice of transfer, sent by the notary. Consequently, the former owner of a property remains liable for charges due before that date, while the purchaser takes over for subsequent charges.
- How are fundraising appeals changing with digitalization?
Modern property managers now offer online platforms where co-owners can view their calls for funds, make payments, and track expenses in real time. No more piles of mail and checks to mail. This digital evolution offers greater transparency, flexibility, and efficiency in the financial management of co-ownership properties. The development of appropriate digital tools allows condominium managers to efficiently manage accounting flows related to calls for funds with as few errors as possible, providing security for co-owners who are concerned about the proper administration of their property.
Among these managers are social landlords, who may be required to act as professional property managers. In this configuration, they themselves manage the calls for funds required for condominiums. They must therefore be able to rely on a reliable and secure accounting solution.
Neovacom, a publisher of business process digitization solutions for real estate professionals, supports numerous social landlords in managing their accounting flows with its Freedz platform. As social landlords and co-owners, they must manage and pay their calls for funds issued by a professional or volunteer property manager; in some co-ownerships, they themselves play this role of property manager. The Freedz platform is specifically designed and developed to help them manage thousands of calls for funds.
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