Definition : Conversion

Afflicted with a health issue, you want to move to an apartment closer to your daughter, which is fitting, given that a unit in her condo building is for sale. However, this unit is rented. During a visit to the premises, the tenant informs you that he has no intention of leaving, claiming a right to stay there for life. At least, for as long as he wants to. On the other hand, the seller tells you that the tenant will have to leave the unit upon receiving a notice of repossession. Intrigued by the tenant's statement, you take time to interview several people to verify this "lease for a lifetime" matter. The answers provided reassure you: if it is sent six months before the planned repossession date, the notice of repossession should allow you to take back the apartment.  

The conversion of an immovable into divided co-ownership has certain undeniable advantages, including that of being able to obtain a mortgage loan from the financial institution of one's choice, while in joint ownership, all owners must finance themselves with the same institution. In addition, the minimum down payment in undivided co-ownership required is 20% of the purchase price of the apartment, and not 5%, as is the case in divided co-ownership, since mortgage insurers do not provide insurance for such loans. It is in this specific context that many owners wish to convert their building into divided co-ownership.

Undivided co-ownership (by indivision) has existed since time immemorial, even before the existence of divided co-ownership. Indivision allows two or more people to own a building while sharing acquisition and operating costs. A co-ownership is said to be undivided when the right of ownership is not accompanied by a material division of the property. The building usually has a single lot number. The owners own a share of this lot. The municipal and school tax bills are thus intended for all the co-owners of the building, who must separate the costs. In addition, since 1994, the Civil Code of Quebec has contained several rules governing joint ownership.

When it comes time to acquire a home, many buyers turn to the acquisition of a multi-unit building (such as a duplex, triplex, quadruplex, etc.). The direct conversion of rental units to divided co-ownership is prohibited in some cities, with a few exceptions, which is why owners first turn them into undivided co-ownership. It should be noted that a building, whose dwellings are all occupied by undivided owners,can be converted into divided co-ownership, subject to certain conditions. But carrying out this conversion requires to overcome several steps involving all owners concerned.

The purchase of a condo leased to a third party is a frequent occurrence in the resale market. Save for an agreement to the contrary, nothing prohibits a co-owner lessor from selling and a purchaser of purchasing an apartment even though the tenant wishes to continue to reside in it. The lease is attached to the immovable, not to the co-owner/ lessor. The lease will continue to be in force even if the unit is sold and the terms and conditions of the lease shall remain the same. Be careful, however, there are some pitfalls and if you are not careful your investment could quickly prove unsuccessful. This is the reason why you need to follow a few steps before, especially if you are a real estate owner for the first time.