Ludovic Le Draoullec

Legal counsel since 2004, Ludovic Le Draoullec became an attorney in 2009 in France and became a member of the Québec Bar in 2010. Having previously worked to completely overhaul the www.condolegal.com website, he is an active member of the condo law group since then, at the law firm de Grandpré Joli-Cœur.

Me LeDraoullec, as counsel and litigator, assists syndicates, promoters and co-owners in several ways, so that they duly fulfill their obligations according to law and the declaration of co-ownership. His involvement includes modifications to the declaration of co-ownership, recovering of condo fees, Court motions and injunctive proceedings. He also acts as president and/or secretary to co-owners and directors meetings. He is well versed in start-up procedures of co-ownerships and the preparation of Registers of the co-ownership, etc..

The penalty clause: easy to adopt!

June 5, 2015 - A resounding judgment was handed down on June 4, 2015 by Judge Danielle Turcotte, Superior Court judge, on the vote required in a co-ownership to adopt a penal clause.

What is a penal clause?

A penal clause is a provision allowing the syndicate to impose to a co-owner penalties or fines if he fails to comply with co-ownership rules. This is a penalty of a pecuniary nature: a sum of money is claimed from the defaulting co-owner. The penal clause must be sufficiently detailed for its application to be simple.

It should thus provide:

  • Who fixes the amount of penalties (Board of Directors or general meeting of co-owners);
  • Which contravention of the declaration of co-ownership may be subject to the imposition of penalties (all or only certain articles);
  • The manner in which penalties are assessed in accordance with the nature of the contravention (continuous or punctual);
  • Warnings required prior to the imposition of penalties (verbal or written warnings, delays required);
  • The manner in which penalties are to be collected.

How to adopt it?

 Penal clauses are seldom included in the declaration of co-ownership published by the notary at the outset of the project (except for a specific penalty for co-owners keeping a vicious or harmful animal).

Practically speaking, if a syndicate wants to benefit from a penal clause in its immovable, it must absolutely adopt it at a general meeting of the co-owners to insert it in its declaration of co-ownership, so that it forms an integral part of it in the same manner as the other articles.

Until June 4, 2015, the authors were divided as to the nature of a penal clause:

  • Some authors considered that the penal clause fell under the Constitutive Act of Co-ownership: its adoption required the preparation of a notarial deed, the draft of which was submitted to the   vote in favor  of more than half  the co-owners of the whole immovable representing at least 75% of the votes of the whole immovable. The deed was then published in the Land Register to be enforceable;
  • Other authors considered that the penal clause fell within the scope of the By-Laws of the Immovable: its adoption required the preparation of a draft submitted to the vote of more than half the votes present and represented (by proxy) in the room during a general meeting of the co-owners. The penal clause is not required to be published in the Land Register.

For several years, the authors had been waiting for the matter to be referred to a court for determination. It is now a fait accompli with the judgment of June 4, 2015: the penal clause falls under the By-Law of the immovable. Judge Danielle Turcotte relies on section 1054 C.C.Q. to justify this position, stating in paragraph 32 of her decision that the penal clause is comparable to a procedure for assessing and recovering common expenses. In doing so, the penal clause is part and parcel of the By-Law of the immovable and can be adopted by regulation, or with the so-called simple majority of the general meeting of co-owners.

Does it have a future?

This ruling removes the uncertainty plaguing syndicates as to how to adopt a penal clause. From now on, co-ownerships will be able to adopt a penal clause much more easily since it will suffice to obtain the majority of the votes present in the room, the only condition being that there be a quorum to hold the general meeting. The penal clause allows Board of Directors an important and very useful tool. However   it must not be forgotten that the wording of such a clause must be precise and well drafted. It is therefore always necessary to be assisted by a lawyer or notary who will propose wording best adapted to the needs of the immovable and the directors.

The judgment rendered facilitates the adoption of a clause of great importance upon the rights and obligations of co-owners. Attendance at general meetings   is more important than ever as  if only 55% of the votes of the immovable are  present at   the  general meeting of the co-owners, half of them (ie only 27.5% of the votes of the immovable) could adopt a penal clause.

To consult the judgment rendered by the Superior Court on June 4, 2015, you may click here.

Ludovic Le Draoullec, Avocat
DE GRANDPRÉ JOLI-COEUR
2000, avenue McGill College
Bureau 1600
Montréal (Québec)  H3A 3H3
Tél. : (514) 287-9535
Fax : (514) 499-0469
Courriel :  l.ledraoullec@djclegal.com

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