Me Ginette Allard has more than thirty years of experience as notary. She has worked in various areas of law including co-ownership. The loyal relationship she maintains with her clients is based on the quality of her services.
She has given several lectures to financial institutions, real estate brokerage offices, Real Estate and Condominium Exhibition (Salon de l’immobilier et de la copropriété) and has participated in television programs on the subjects. She is also a lecturer for the condominium diploma in notarial law at the Faculty of Law of the University of Sherbrooke.
June 7th, 2010 – As a Notary, I receive on a regular basis mandates dealing with divided or undivided co-ownership.
Firstly, indivision has existed well before divided co-ownership. Indivision allows two persons or more to own an immovable while sharing the acquisition costs and operating expenses. Therefore, it gives access to property to many persons who cannot afford to become owners. Furthermore, indivision is the only option for many owners when the law does not allow the conversion into divided co-ownership, more particularly in the City of Montreal.
Undivided co-ownership can occur with or without an agreement between the co-owners. Nevertheless, the marketplace shows that drafting and signing an indivision agreement incorporating provisions for the protection of the undivided co-owners and the hypothecary creditors increases the value of an apartment, in comparison with indivision without a formal agreement. This is reflected both at resale of the share of a co-owner and in the evaluations carried out to obtain hypothecary financing. In certain neighbourhoods, this increase in value is equivalent to the one caused by the conversion into divided co-ownership.
Separate financing for each apartment, in the form of hypothecary loans secured by the undivided share of each undivided co-owners and the rights of use thereon, is now offered by a few financial institutions. Each undivided co-owners is responsible for the repayment of its own loan, and in the case of default of an undivided co-owner, the creditor will exercise its guaranty only against his share. Furthermore, the undivided co-owner must have at its disposal a down-payment of 20% of the value of his share, because the hypothecary insurers do not offer insurance for these loans.
The Civil Code of Quebec, provides since 1994, many new rules on undivided co-ownership.
In comparison with undivided co-ownership, the regime of structured undivided co-ownership allows more freedom in drafting the agreements. For example, the undivided co-owners could decide to grant a veto to one of the undivided co-owners for certain decisions that unanimity is compulsory for others or adopt majorities without necessarily respecting the rule of proportionality of the share of each undivided co-owners. The allocation of common expenses can also be fixed on a different basis than the proportion of the share of each co-owner.
Even though the obligation to make a down-payment of 20% can be disadvantageous for some, for other co-owners, it is reassuring.
Indivision also avoids the obligation to carry out complex cadastral operations (there is no need for municipal approval nor for the deposit of new lot numbers at the cadastral service and in the Land Register). This reduces costs and shortens the delays by many months in comparison with divided co-ownership.
The Civil Code of Quebec allows an owner to repossess a dwelling to inhabit it himself or for the use of a close family member. However, if an owner is in indivision with a person who is not his spouse, it is not possible for the said co-owner to repossess his residential dwelling, because there it is prohibited by the Civil Code. This limitation does not apply in commercial matters.
The undivided co-owners are solidarily responsible for certain expenses and charges, such as municipal and school taxes, insurance, maintenance costs and repairs to common portions. Furthermore, it is essential that the agreement provide a provision compelling the undivided co-owner who wishes to carry out major work in his apartment to furnish to the other co-owners acceptable guarantees that he has sufficient funds to pay for the work. For this purpose, the equity (down-payment of 20%) on each shares shall guarantee the fulfillment of the obligations of the undivided co-owners assumed under the terms and conditions of the agreement by the instrument of a reciprocal cross- hypothec created in favour of each undivided co-owners in the indivision agreement.
Structured indivision, even though not the ideal solution for every co-owner, is advantageous in many cases. The co-owners should therefore review carefully the benefits and disadvantages of this mode of co-ownership, before making a commitment.
As a Notary, I am of the opinion that both types of co-ownership have their reason for being.
Me Ginette Allard, Notary
DE GRANDPRÉ JOLI-COEUR s.e.n.c.r.l.
2000, avenue McGill College, suite 1600
Montréal (Québec) H3A 3H3
Phone : (514) 287-9535
Fax : (514) 499-0469
Mail : email@example.com
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