Suspension and reduction of voting rights

 

The voting rights of the co-owners of the immovable can, in certain circumstances, be suspended or reduced. It is important to know who may be affected by these restrictions and their consequences.

 

 

SUSPENSION

Article 1094 of the Civil Code of Québec states that "Any co-owner who, has not paid its share of the common expenses or his contribution to the contingency fund for more than three months, is deprived of his voting rights”. This withdrawal of voting rights   affects only those votes attached to the relevant fraction for which payments are in default.

Thus the defaulting co-owner can no longer vote at the General Meeting, as long as it has not completely cured his default. To recover the right to vote said fraction, he will need to pay his dues. The co-owner concerned can do it at any time, even during the General Meeting. However, the syndicate may require payment in cash, by money order or certified check, credit card or bank transfer (article 1564 of the Civil Code of Québec).

 

REDUCTION

 

When the syndicate is the co-owner of a fraction

Article 1076 of the Civil Code of Québec states that "the syndicate may, if authorized to do so, acquire or alienate fractions, common portions or other real rights". However in a general meeting, it cannot exercise the voting rights attached thereto. The number of votes that may be cast at the General Meeting of the co-owners is reduced accordingly.

“Majority co-owner” in a co-ownership comprising fewer than five fractions

In small co-ownerships comprising less than 5 fractions, the legislator intended to prevent one co-owner imposing his will if he holds  a  number of votes exceeding  the majority (50% + 1 of the votes ). In accordance with the principle laid down in article 1091 of the Civil Code of Québec, the number of votes of the majority co-owner is reduced to the total votes of the other co-owners present or represented at the General Meeting. Thus he can never hold an absolute majority of the votes in the co-ownership.

The following example illustrates the calculation. In a four unit co-ownership respectively representing values ​​of 35%, 25%, 20% and 20%, a co-owner holding the units worth respectively 35% and 20% would not have 55% of the voting rights, but 45% of the voting rights (equal to the relative value of the two other units, representing 25% and 20%) if all the co-owners are present at the meeting. If the only other co-owner present is the one holding a relative value of 25%, the co-owner holding the two units (totaling 55%) will hold voting rights of 25%.

 In case of a disagreement between the majority co-owner and the other co-owners there will be a deadlock. The co-owners will have to reach a compromise, using if necessary the mediation or arbitration mechanisms provided in their declaration of co-ownership. And in the event there are no such provisions in the declaration of co-ownership, they may request the intervention of the court to resolve the deadlock.

The developer and his successors in a co-ownership comprising five or more fractions

To prevent that awith more than half the votes of the developer co-ownership imposes his will at General Meetings, article 1092 of the Civil Code of Québec limits his control over the decisions of the General Meeting of the co-owners. This article stipulates that " at the end of the second and third year after the date of registration of the declaration of co-ownership a developer of a co-ownership comprising five or more fraction is not entitled to more than 60% of all the votes of the co-owners, in addition to the votes attached to the fraction serving as his residence .This number is reduced to 25% thereafter”.

Thus, the developer’s voting rights are progressively reduced, except for that fraction which serves as his residence. It is appropriate to identify three distinct periods:

1st period: during the two first years following the registration of the declaration of co-ownership, there is no reduction;

2nd period: at the end of the second year following the registration of the declaration of co-ownership and until the expiry of the third year, the number of votes of the developer may not exceed 60% of all the co-owners votes;

3rd period: at the end of the third year following the registration of the declaration of co-ownership and at any time thereafter, the number of votes of the developer may not exceed 25% of the total votes of the co-owners

Moreover, under article 1093 of the Civil Code of Québec, this vote reduction also applies to the successors of the developer who:

  • do not inhabit the immovable;
  • have not acquired for a price equal to its fair market value, the private portions they own.

Thus, if the developer tries to circumvent this vote reduction by transferring fractions to close acquaintances (such as, family members, business partners, etc.), these persons  would also be subject to the voting rights reduction and the voting rights attached to their fractions would be included in the maximum percentage of 60% or 25% attributed to the developer.

Consequences of voting rights reduction

Article 1099 of the civil code of Québec provides that:

 Where the number of votes to which  a co-owner or a developer is entitled is  reduced by the effect of  this section, the total number of  votes available to all  the co-owners  to decide on a question  requiring a majority in number and in  votes is reduced by the same number.

This provision clarifies that the effects of the voting rights reduction also apply to decisions requiring a majority in number of co-owners and a majority in votes (double majority). These decisions are those listed in articles 1097 and 1098 of the civil code of Québec.

WHAT YOU SHOULD KNOW! The rules related to the suspension or reduction of voting rights are compulsory. It is the duty of the President of the General Meeting of the co-owners to ensure their implementation. In the event of non-compliance with these rules, any co-owner is entitled to make an application to the court in annulment of the decisions taken at the General Meeting, in the period of 60 days following the meeting.

 WHAT TO KEEP IN MIND : In co-ownerships comprising less than 5 fractions, the majority co-owner will see his number of votes reduced at all times, to the equivalent of the sum of the votes of the other co-owners.

  WARNING! One must not confuse the consequences of a voting rights suspension with those of a voting rights reduction. In the first instance, it may be ended, without formality, by the defaulting co-owner paying to the syndicate all outstanding amounts owing. In the second case, the co-owner whose voting rights are reduced may not in any event recover their full value.

 CONSULT THE PUBLICATION: Guide de procedure et de fonctionnement des assemblées des copropriétaires (Procedures and operation of general meetings of co-owners guide)

 

Return to the super-factsheet ''Voting in a General Meeting''