Even though a co-owner is at home in his apartment, its use should be in accordance with the prescriptions of the declaration of co-ownership. This document may contain provisions prohibiting any activities other than residential ones in the immovable. To ensure the welfare of its residents, it may be necessary for the syndicate to impose sanctions to co-owners or tenants who disregard the by-laws of the immovable. It may even, on occasion, petition the court to assert the rights of all co-owners.
Preventing hotel type rentals
The by-laws of the immovable may be set up against the lessee or occupant of a private portion (1057 of the Civil Code of Québec), upon it being given to them by the co-owner or the syndicate of co-owners. However, as the occupation time of short-term rentals is ephemeral, most of the time, the syndicate will have a difficult time of intervening to bring to order temporary tenants who may have already left the premises when an action is undertaken. Compounding this problem is the difficulty of proving that these people have actually received a copy of the By-laws of the immovable. For both reasons, any syndicate must provide in its declaration of co-ownership, explicit and coercive provisions, if it wishes to regulate or prohibit short-term rentals.
The declaration of co-ownership may provide, by the insertion of a penalty clause, penalties arising from the failure (by a co-owner) to comply with the by-laws of the immovable (Article 1622 of the Civil Code of Québec). In such cases, the offending co-owner may be required to pay a pre-determined sum to the syndicate as damages. The penalty clause provides the syndicate, with a coercive tool whose implementation is inexpensive, thus avoiding costly injunctive remedies.
Fair and equitable penalties
The amount of the penalty clause should not be excessive or unreasonable, although it must take into account the revenues generated by the short-term rental to be truly effective. At the end of the day, this amount should be enough to discourage co-owners from renting their unit for the short term, if this activity is prohibited in the immovable. As it is sometimes difficult to determine a fair and equitable amount, the syndicate can refer to the Act respecting tourist accommodation establishments and its application regulation. It provides fines for those who illegally practice short-term hotel type lodging .This being said, a co-owner who does not pay the penalties levied could be compelled to do so by the means of an application against him before the Small claims court, Division of the Court of Québec (under reserve of the conditions provided by the articles 953 to 998 of the Code of Civil Procedure), so that the syndicate can collect payment.
Ridiculously low penalties
If the amount of the penalty is insufficient, it will perhaps not have the desired effect. Some co-owners may not be deterred. They will continue to rent their apartment for short terms,more particularly if the cost-benefit ratio associated with this illegal activity is in their favor. Conversely, if the amount of the penalty is enough to convince the most recalcitrant, they will end their activity.
However sometimes, despite the syndicate’s best effort to end it, a few irreducible co-owners continue their activities? In such cases, an injunction is the ultimate weapon in case of recurrence. It can be obtained by petitioning the court.
Once the syndicate obtains from the court an injunctive order against the offending co-owner and the activity ceases, it may not claim from the latter penalties for the future. However the co-owner will be liable (for the fines) for any offense committed before this injunctive order and its enforcement. Also, be aware that if the co-owner violates the injunction or refuses to obey it, the court may, in addition to other penalties that may be imposed, order the sale of his fraction. (Art. 1080 C.C.Q.)
To obtain this injunction, the syndicate must prove that a co-owner rents his apartment in breach of the by-laws of the immovable. It should build up a file containing irrefutable evidence. It will need to be collected without infringing on the individual rights of the persons involved. If gathering such evidence is done in compliance with the Law, such evidence cannot be excluded, on the basis of being detrimental to the administration of justice or that it infringes fundamental rights. Remember that doing things the right way will also prevent a possible recourse on the part of individualsconcerned.
However, a recent decision on short-term rental gives us food for thought. At the very least, it confirms that any co-owner must abide to the bylaws of the immovable. This case dates back to June 2016 and features American actress Jennifer Lawrence, who came to Montreal for a shoot. Her agency, Day6 Productions, rented for her to use a condo situated in the Syndicat des copropriétaires du Sir George Simpson building. However, the by-laws of the immovable prohibited short term rentals (less than a year). Despite this bylaw, the Superior Court judge did not recognize the illegality of the lease which had a term of only three months.
But two years later, the Court of Appeal quashed that decision. Judge Yves-Marie Morrissette referred in particular to article 1057 of the Civil Code of Quebec, which states that the by-laws of the immovable are enforceable against a tenant from the moment he becomes aware of it. From the moment the bylaw was served upon the tenant and the occupant, and irrespective of their ignorance of said bylaw when the tenant signed the lease, both the tenant and the occupant of the condo were compelled to abide to it. Insofar as the owner is concerned, the short term rental ban bylaw had been adopted in September 2015, a little less than a year before the subject lease. Moreover, the co-owners-lessor had acknowledged receipt thereof a few days after its entry into force. There was therefore no doubt that "this new clause was opposable to them", even if they did not take cognizance of it when they acknowledged receipt thereof.
The Court of Appeal therefore followed its 2001 judgment in Kilzi, to the effect that the syndicate does indeed have the right to regulate the right to rent by prohibiting rentals of a duration of less than one year in immovable with a residential destination.
Filing a complaint
The Act respecting Tourist Accommodation Establishments (and its regulation) provides fines for those who illegally supply short-term hotel type accommodation. Any syndicate struggling with delinquent landlords co-owners has the legal interest to file a complaint. Upon filing a complaint, agents can investigate. The investigator has the following powers:
This avenue can be very effective against a non-compliant landlord-co-owner.
WHAT YOU SHOULD KNOW! Once a violation of the declaration of co-ownership is demonstrated, the syndicate which has a penalty clause at its disposal is entitled to claim the amount of the penalty without having to prove the prejudice suffered. However, if the amount is excessive, and the co-owner disputes it in court, he could obtain a reduction of the penalty.
WHAT TO KEEP IN MIND: The syndicate of co-ownership may crackdown against non-compliant co-owners, by the means of a penalty clause inserted in the declaration of co-ownership. You should know that such a clause is not automatically provided in the declaration when a co-ownership is created. Therefore, it is in the syndicate’s best interest to amend its declaration of co-ownership, to introduce this measure whose effects are usually an effective deterrent.
WARNING! The amount of the penalty must be reasonable. The courts have the power to reduce penalties determined to be abusive. One must find a balance between deterrence and disproportion when fixing the amount of a penalty under the penal clause.