Divided co-ownership
According to the Civil Code of Quebec, co-ownership is ownership of the same property, jointly and concurrently, by several persons, each of whom is privately vested with a share of the right of ownership.
Divided co-ownership is where the right of ownership is apportioned among the co-owners in fractions each comprising a physically divided private portion and a share of the common portions.
But what exactly does that mean in plain English?
Well, it means many things. But, let’s take a look at the most important elements:
Basically, it means you are purchasing a unit (like a condo or apartment) in a building that has been divided into several units or fractions. Some of these parts are private (such as your unit and some parking spaces) and others are common (such as a swimming pool or tennis courts).
Your unit is for your own exclusive use. For example, you can sell it as you wish. You can also make minor changes to it, as long as they do not affect the building’s structure or violate the building’s regulations.
Your condo unit will also have its own lot number (like a house) and you will pay your own municipal taxes.
As a co-owner, you will also have access to the common areas, such as a party room, courtyard, or gym. However, you will also have to pay a fraction of the maintenance of these areas through what is known as a monthly condo fee or maintenance fee, which is determined by the number of co-owners, the size of the building, its common areas, and its services.
Contingency fund
The Civil Code of Quebec requires condo buildings to have a contingency fund for unforeseen events.
This fund is earmarked to finance work that may be required in the building’s common areas. This sum is a minimum of 5% of the common expenses paid by the co-owners, and is separate from the money used for regular maintenance of the common areas.
The declaration of co-ownership
The declaration of co-ownership is a notarized document that sets out the rules governing the divided co-ownership. It will tell you things like whether pets, parties or barbecues are allowed, as well as the amount of your condo fees.
The declaration also includes the building’s regulations and technical information, like lot numbers.
Most importantly, the document establishes the management of the building, which is carried out by the syndicate or management agent. This is a moral person who oversees the maintenance, administration and execution of any work needed on behalf of the building, such as repairs or renovations.
The board of directors is the part of the syndicate that holds group executive and decision-making power. Elected annually by all the co-owners, the board is responsible for preparing a budget, setting out the common fees, and determining the amounts to be paid into the contingency fund. The board of directors will also negotiate contracts with service providers for the building.
Undivided co-ownership
If you purchase a condo held in undivided co-ownership, you are buying a share or percentage of the entire building. Under undivided co-ownership, the property is not divided into private and common portions. The right of ownership of the building, along with its operating costs, is shared by several people.
Additionally, a single lot number is assigned to the entire building and not to the individual units. The same applies to taxes and common fees, which are shared proportionally by all the co-owners.
In order to obtain a mortgage for an undivided property, the co-owner must make a down payment of a minimum of 20% of the value of their share of the co-ownership.
The indivision agreement
In undivided co-ownership, an indivision agreement is recommended but not mandatory.
This agreement defines the rights of each co-owner and the management of the property, and may include the following information:
- Each co-owner’s exclusive usage rights
- Expenses (including taxes)
- Maintenance and improvement obligations
- General building administration rules
- Duration of the agreement (up to a maximum of 30 years)
- Selling restrictions
- Safeguards in the event any of the co-owners default on their mortgage payments
The indivision agreement will also state whether an individual co-owner is free to sell their unit or must offer it to the other co-owners first. This is called a pre-emptive right or right of first refusal (section 1022 of the Civil Code of Quebec).
In undivided co-ownership, the co-owners agree on the amount to be paid annually to the contingency fund and building maintenance. This may also be included in the indivision agreement.
With respect to managing the building, there is no syndicate or board of directors. In undivided co-ownership, the co-owners administer the property jointly and decisions are made by a majority of the co-owners. However, for things like selling a unit, a unanimous decision is necessary.
