SYNDICATE OF CO-OWNERS

A. Definition of divided co-ownership

The main characteristic of divided co-ownership is that it “requires a physical division of the property into several distinct parts”. Also, divided co-ownership implies that the “ownership of the immovable is divided into fractions belonging to one or several persons.

Each fraction comprises a physically divided private portion belonging to its owner, an undivided share of the common portions and, in most cases, a right of use of certain common portions that have restricted use[1]. ”

B. Definition of common expenses

The common expenses can be defined as “the overall charges and expenses arising from co-ownership”. It can also be said that “most common expenses are said to be “general”, because all the co-owners directly benefit from these expenses. Examples of common expenses are as follows:

  1. Accounting and record keeping for the Syndicate;
  2. Notice calling for the annual general meeting of the co-owners;
  3. Current expenses relating to the building;
  4. Remuneration of administrators;
  5. Clearing / snow removal of driveways, gardening etc.[2]

C. Obtaining payment of common expenses/charges of a condo

The contribution of each co-owners to common expenses arising from co-ownership and operation of the building, as well as contingency fund is the responsibility of the Syndicate of co-owners, which has certain means to claim payment for the sums due.

It is important to know that the procedure to follow is identical, both for the payment of common expenses or the contribution to the contingency fund.

It should also be noted that, in one case or the other, the co-owner who has not paid his/her share or his/her contribution for more than three (3) months is deprived of his/her voting rights at the general meeting of the co-owners, pursuant to section 1094 of the Civil code of Québec (C.c.Q).

This does not mean that the Syndicate has to wait three months before making a move; it is best to act as quickly as possible when a co-owner fails to pay his share of common expenses.

STEPS TO FOLLOW WHEN A CO-OWNER FAILS TO PAYS HIS/HER SHARE OF COMMON EXPENSES

 

Step 1: Letter of demand or notice of publication of legal hypothec

 

a. The letter or demand

The first step consists of sending a letter of demand to the co-owner in question to request that he/she remedy his/her default and pay his/her charges or contribution, as well as the accrued interest.

It is important that the letter of demand be sent by registered mail or via bailiff to obtain recorded proof of delivery.

Unless it is specifically stated in the declaration of co-ownership, it is not necessary to send a copy of the letter of demand to the hypothecary creditor of the co-owner.

It should be kept in mind that the letter of demand is a preliminary step that may be carried out prior to taking legal action, as the co-owner has to be put into default before the Syndicate pursues its legal recourse.

Prior to the notice of a legal hypothec, a first step would be to draft a letter of demand claiming that in the event where the co-owner fails to pay the sums due, the Syndicate will be forced to register a notice of legal hypothec against the co-owners’ fraction.

b. A notice of publication of a legal hypothec

If the letter of demand is not sufficient to obtain payment from the co-owner in default, the Syndicate may decide to register a notice of a legal hypothec which is a more effective letter of demand that is published at the Bureau des publicité des droits (“Registre foncier” or Land Registry).

The Syndicate has as its disposal an important tool to recuperate the sums due by the co-owner(s) in default. In fact, the claim of the Syndicate for the payment of common expenses and the contribution to the contingency fund can result in the registration of a legal hypothec.

However, it should be noted that the legal hypothec exists in favour of the Syndicate, and not in favour of the co-owners themselves, which implies that only the Syndicate can register a legal hypothec[3].

In order for the co-owners’ fraction to be hypothecated, the co-owner must be have been default for more than 30 days on payment of his common expenses or his/her contribution to the contingency fund.

This notice must indicate the name of the co-owner, the nature of the claim, the amount owing on the day the notice is registered, and the expected amount of charges and claims for the current financial year and the next two years[4].

Interestingly enough, the registration of the notice does not have to be served to the co-owner in default[5], but communicating the notice to the co-owner could be useful because it might motivate him/her to perform his/her obligation to pay the sums due, fearing that his/her housing unit might be sold.

The Syndicate has everything to gain by requiring his address to be registered in order to receive notification from the registrar if, for example, a prior notice of the exercise of a hypothecary right has been published on co-owner’s fraction[6].

The registration of the legal hypothec also has consequences on the immovable in question in the following manner:

  1. Credit worthiness of the individuals that owns the property:

The registration of a legal hypothec can impact the It could also impact the creditworthiness of the individuals who own the property for Transunion and Equifax (credit companies) in the event that they would require to obtain credit such as a VISA, car or a bank loan.

  1. Impact on the first ranking mortgage

The registration of the legal hypothec also has consequences on the first ranking mortgage of your property as it may not be sold without radiating the notice of legal hypothec on the property.

The registration and publication of a legal hypothec is a public document that may be viewed by the mortgage company or the financial institution. For this reason, the property subject to the legal hypothec may not be sold without radiating the legal hypothec as it impacts the first ranking mortgage rights.

Step 2: The prior notice of the exercise of a hypothecary right

When the Syndicate intends to exercise his hypothecary right, it must file a prior notice to this effect at the registry office[7].

The importance of filing the prior notice is evidenced at the second paragraph of article 3061 C.c.Q. Unless an action has previously been brought and published, the registration of the legal hypothec of the Syndicate is cancelled upon the expiry of three years after its date of registration.

This prior notice shall disclose any failure by the debtor to perform his obligations, and contain a reminder, where applicable, that the debtor or a third person has the right to remedy the default.

It shall also disclose the amount of the claim in capital, and in interest, if any, and the nature of the hypothecary right which the creditor intends to exercise, furnish a description of the charged property, and demand from the person against whom the hypothecary right is to be exercised that he surrender the property within 60 days[8].

It should be noted that during and before the 60 days notice period, the co-owner may defeat exercise of the right by remedying its default and paying the Syndicate the amount owing[9].

In a situation where the faulty co-owner decided to pay the Syndicate the amounts owing, the legal hypothec would be extinguished, because it is an accessory right valid as long as the obligation whose performance it secures subsists[10].

It is the duty of the debtor co-owner to radiate the legal hypothec at his/her own costs to end its effects. This implies that the Syndicate will have to start the process all over again in the event that the co-owner finds himself/herself in default again.

Step 3: Instituting legal proceedings by Syndicate

When the notice and publication of a legal hypothec and/or prior notice of legal hypothec does not suffice to prompt the co-owner to pay his/her debt, it becomes necessary that the Syndicate files a judicial demand in one or both manners as follows:

  • Personal right of action
  • Hypothecary right of action
  1. Personal right of action against the co-owner:

Provided that the sum claimed is less than $15,000, and provided that the Syndicate had no more than five persons bound to it by contract of employment during the 12-month period preceding the application, it could take a personal right of legal action in the Small Claims Division of the Court of Québec[11].

Otherwise, the right of action shall be in Court of Quebec or Superior Court depending on the amount of the claim.

  1. Hypothecary rights:

Apart from the personal right of action, the Syndicate by way of an application demand motion exercise one of the four(4) hypothecary rights:

a) Take possession of the charged property to administer it;

b) Take it in payment of its claim;

c) Cause it to be sold by judicial authority;

d) Sell it himself.

Taking in payment, the consequences

Amongst the recourses available to the Syndicate to exercise its hypothecary right, taking in payment is one of the recourses that can result in unfortunate consequences for the co-owner who fails to pay the sums due.

If the co-owner does not pay the Syndicate the amount owing to him before the 60 day period or before the property is taken in payment, he/she risks being deprived of his property for not paying a debt of very little value compared to the housing unit at stake.

According to a recent decision from the Court of appeal, it is not possible to conclude that there is a situation of unjust enrichment when taking in payment, even though a real prejudice is caused to the debtor whose is deprived of a property which is worth more than $150,000 for a claim of less than $2,000[12].

Prescription of legal hypothec:

It is understood that the legal hypothec of the Syndicate is valid only for the current financial year and the following two (2) years. It must be noted that, the legal hypothec of a Syndicate of co-owners on the fraction of a co-owner is extinguished three years after it is registered, unless the Syndicate, in order to preserve it, publishes an action against the owner who has defaulted or registers a prior notice of the exercise of a hypothecary right[13].

Recovery of lawyer’s extra-judicial fees incurred for the exercise of the hypothecary right

Some declarations of co-ownership clearly state that lawyer’s fees, or extra-judicial fees, can be recovered by the Syndicate, as well as the registration costs and the common expenses payable.

However, section 2762 C.C.Q. states that the Syndicate is not entitled to demand any indemnity from the co-owner except the interest owing and the costs incurred.

In accordance with the second paragraph of section 2762 C.C.Q., the costs incurred exclude extra-judicial professional fees payable by the creditor for services required by the creditor in order to recover the capital and interest secured by the hypothec[14].

However, the Court of appeal has decided that the Syndicate had the right to obtain damages to compensate the important legal costs incurred[15]. In fact, the award of legal fees must be justified by the declaration of co-ownership[16].

Future acquirer of your fractional condo unit: beware!

If you are contemplating buying a fraction of divided co-ownership from someone, you should act cautiously, as you are bound to pay all common expenses due with respect to that fraction at the time of the acquisition[17].

As provided for by the law, a person contemplating the acquisition of a condo may request from the Syndicate of co-owners a statement of the common expenses due with respect to the fraction and the Syndicate is thereupon authorized to provide the statement to him/her, subject to the Syndicate giving prior notice to the owner of the fraction or his successors; in such a case, the prospective acquirer is bound to pay the common expenses only if the statement is provided to him/her by the Syndicate within 15 days of the request[18].

If common expenses are due, this is an element that can be used as leverage when negotiating the price with the sellers.

[1] http://www.lacopropriete.info/lexique.html, « Copropriété divise »

[2] http://www.lacopropriete.info/lexique.html, « Charges communes »

[3] http://www.lacopropriete.info/info-experts.html?billetID=6289#Q6289

[4] 2729 C.C.Q.

[5] Collection de droit, Volume 6, page 145.

[6] 3017 C.c.Q.

[7] 2757 C.c.Q.

[8] 2758 C.c.Q.

[9]2761 C.c.Q.

[10] 2661 C.c.Q. et 2797 C.c.Q.

[11] http://www.justice.gouv.qc.ca/francais/publications/generale/creance.htm

[12] Agalakov Sheloykina c. Syndicat des copropriétaires Les habitations Poupart, 2012 QCCA 1620 (CanLII), <http://canlii.ca/t/fsr9b> consulté le 2015-09-06

[13] 2800 C.C.Q.

[14] Tiffany Towers Condominium Association c. Schnabel, 2010 QCCQ 8300 (CanLII), <http://canlii.ca/t/2ctrs> consulté le 2015-09-06

[15] Schnabel v. Tiffany Towers Condominium Association, 2012 QCCA 2192 (CanLII), par. 9-10.

[16] Bédard c. Cooper, 2013 QCCQ 14986 (CanLII), <http://canlii.ca/t/g28gw> consulté le 2015-09-06

[17] 1069 C.c.Q. al 1

[18] 1069 C.c.Q. al 2

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The above noted text should not be construed as providing legal advice or a statement of your claim. The process highlighted above are merely parameters and barometers and do not constitute any warranties and guaranties with regards to your file at hand. We strongly recommend that you seek legal advice with a licensed attorney from the Barreau du Quebec or a notary at the Chambre des Notaires. Each case must be seen and analysed on its merits as the legal process may be complex and cumbersome.