Syndicate Financial Statements: The Lines to Check
The minutes tell you what the board keeps putting off. The financial statements (états financiers) show what it is costing. Three years of statements, read side by side, answer questions the attestation only hints at: whether owners are paying, whether the building is running a deficit, and whether the contingency fund is quietly covering the gap.
You don't need to be an accountant. You need to know who prepared the statements, and which lines to compare from one year to the next.
What to ask for
Ask for the last three years of financial statements and this year's budget (budget prévisionnel). The statements are part of the register the syndicate keeps for the co-owners, and the notice of each annual meeting must include the balance sheet, the income statement, the statement of debts and claims (état des dettes et créances) and the budget (art. 1087). The seller should have them.
Statements can be close to a year old by the time you read them. Ask for the current balances of the contingency fund and the self-insurance fund (fonds d'autoassurance) as well.
First, who prepared them
Not all financial statements carry the same weight. Before the numbers, find the accountant's report. It is usually the first page after the cover, before the balance sheet: on the firm's letterhead, addressed to the board or the co-owners, and signed and dated by the firm. That page tells you what the accountant did. Look for the sentence highlighted below. If the statements open straight onto the balance sheet with no such page, they are internal.
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Audited (audit). A CPA tested the figures against supporting evidence and gives an opinion that the statements are presented fairly. This is reasonable assurance, the strongest level. Look for an independent auditor's report (rapport de l'auditeur indépendant).
Assurance: Reasonable
Independent Auditor's Report
In our opinion, the financial statements present fairly, in all material respects, the financial position of the syndicate…
A CPA tested the figures against evidence.
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Reviewed (mission d'examen). A CPA asked questions and analyzed the figures, without testing them against evidence, and reports that nothing came to their attention suggesting a material misstatement. This is limited assurance.
Assurance: Limited
Review Engagement Report
Based on our review, nothing has come to our attention that causes us to believe that the financial statements do not present fairly…
A CPA asked questions and analyzed the figures.
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Compiled (mission de compilation). A CPA assembled the statements from information the syndicate provided, without verifying it. There is no assurance. The older name for this report was a "notice to reader" (avis au lecteur).
Assurance: None
Compilation Engagement Report
Accordingly, we do not express an audit opinion or a review conclusion, or provide any form of assurance…
A CPA assembled the figures, without checking them.
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Internal. Statements prepared by the manager or the board, with no accountant's report. They are the syndicate's own account of its finances.
Assurance: None
Statement of Financial Position
Unaudited · Prepared by management
No accountant's report: the numbers start on page one.
Wording varies by firm. These are typical phrases, not full reports.
The Civil Code doesn't require a syndicate's annual statements to be audited. It requires an accountant's comments on the statements only at the special meeting held when the developer hands over control, with an audit if co-owners holding 40% of the votes ask for one (art. 1105). The declaration of co-ownership or a vote of the meeting can require more.
Compiled or internal statements aren't a warning sign on their own, especially in a small building. They just mean the figures haven't been checked by anyone outside the syndicate, so the comparisons below matter more. A building that has gone from audited to compiled statements, or has changed accountants, deserves a question.
The lines to check
- Charges billed against charges collected. The attestation gives three years of both totals (regulation, s. 10), and the statements show the amounts still owed by co-owners. A gap that widens from year to year means some owners aren't paying, and everyone else is carrying them. The syndicate can register a legal hypothec (hypothèque légale), similar to a lien, on a unit whose owner is more than 30 days behind (art. 2729), which is why arrears often come with legal fees.
- Legal and professional fees. A jump in legal fees (frais juridiques) points to collection actions, a dispute with a contractor or an owner, or a claim. Find the matching item in the minutes.
- Insurance. Look at how the premium has moved, and at any deductibles paid. The self-insurance fund exists to pay the syndicate's deductibles (art. 1071.1). Compare its balance with the highest deductible shown on the attestation.
- The operating result. Look at the surplus or deficit (excédent ou déficit) over the three years. A single deficit can be an unusual year. Repeated deficits mean the budget is too low, and it will be corrected through higher charges.
- Money taken out of the contingency fund. The fund may be used only for major repairs and the replacement of common portions (art. 1071). Look at the note or schedule that shows the fund's movements. A withdrawal that doesn't match major work in the minutes, or a transfer to the operating account to cover a deficit, means the fund is weaker than its balance suggests. Our article on the contingency fund shows how to tell whether it is sufficient.
- Loans. If the syndicate has borrowed to pay for work, the repayments come out of the owners' charges for years. Note the balance, the rate and the term.
Three years, side by side
An illustrative example
- Charges billed
- $310,000 to $325,000
- Charges collected
- $304,000 to $289,000
- Legal fees
- $4,000, $15,000, $27,000
- Operating deficit
- $6,000, $18,000, $31,000
- Taken from the contingency fund, year 3
- $30,000
A 48-unit building. Over three years, charges billed rise from $310,000 to $325,000, while charges collected fall from $304,000 to $289,000. Legal fees go from $4,000 to $15,000 to $27,000. The operating deficit grows from $6,000 to $18,000 to $31,000. In the third year, the contingency fund schedule shows a $30,000 transfer to the operating account, and the minutes show no major work that year.
Read together: uncollected charges have grown from $6,000 to $36,000 a year, legal fees have grown as the syndicate chases them, and the contingency fund covered the latest deficit. The fund balance on the attestation is accurate, but it is $30,000 lower than it should be, and next year's budget will have to rise. For your buyer, that means likely higher charges and two questions for the syndicate: how much of the arrears comes from a single owner, and has a legal hypothec been registered against the unit?
What the decisions say about brokers who passed on these documents unread: A broker's diligence.
What to do with it
- Ask for three years of statements and the current budget, and read the report on top first: audited, reviewed, compiled or internal.
- Compare charges billed and collected, legal fees, insurance and the operating result across the three years.
- Look for any money taken out of the contingency fund that doesn't match major work in the minutes.
- Check the self-insurance fund against the highest deductible.
- Turn each trend into a question for the syndicate, and into a number for your buyer. Use the unit's relative value, not an average, to work out their share.
Sources
Read the whole file, not one document.
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This article is for general information only and is not legal advice.
This article was written with the help of AI tools, then reviewed and checked against the laws, regulations and decisions it cites by the Quotepart team.