|Écrit par Me Sébastien Fiset , LL.B., B.A.A.|
|Vendredi, 10 Septembre 2010 11:36|
Buying a Condominium / Coop – What You Should Know Before Purchasing
Contact the author : firstname.lastname@example.org
Co-ownership dwellings are playing an increasingly important role in the Quebec environment.
Two entire chapters of the law (Civil Code of Québec) are actually devoted to governing the relationships of personal rights between individuals.
There are two (2) types of co-ownership: divided co-ownership and undivided co-ownership. These types of co-ownership may also be established by phases (verticals and horizontal).
- In a divided co-ownership, you are the owner of a fraction of the co-ownership which is made up of one or several private portions and an undivided share of the common portions which are managed by a « syndicate » (legal person) and you therefore contribute to the management expenses according to the relative value of your fraction.
- In an undivided co-ownership, you are the owner of a portion of the entire property; you manage the property jointly and share the expenses according to your share of the entire property.
Life in a divided co-ownership is governed by the Declaration of Co-ownership whereas in undivided properties it is by an Undivided Agreement.
As the Declaration of Co-ownership and the Undivided Agreement are voluminous documents and written in legal jargon, the assistance of a professional who specializes in ownership law is most useful to understand and grasp the nuances before making a purchase. As these documents are not mutual agreements which provide the possibility of negotiating clauses between the parties, it is essential that you understand exactly what is involved before purchasing to avoid any surprises.
One will most certainly find more restrictions in a co-ownership than in a rental property. In fact, living in a co-ownership is established and controlled by numerous laws, restrictions and bans. Possessing certain types of animals may not be allowed, using a barbecue, installing an antenna, using a treadmill, changing the floor covering, etc. Parking places and storage areas may also be limited and may be governed by precise regulations. It is therefore wise to verify beforehand what has been documented in the Declaration of Co-ownership or in the Undivided Agreement. In addition, it is possible that other regulations have been adopted subsequent to the publication of the Declaration of Co-ownership or the Undivided Agreement, and these would be recorded in the Register of Co-ownership and would carry the same legal weight. You should therefore make yourselves aware of these also.
It would also be wise to become informed of the history of the building, of the status of the revenues and expenses of the co-ownership, of the maintenance records and the reserve fund. This information is also documented in the Register of Co-ownership.
It is important to determine the monthly fees, if there have been special assessments charged and the reason for these (insufficient condo fees or major work to be carried out and an insufficient reserve fund), and if other assessments are foreseen in the immediate future. Reading the minutes of the meetings will inform you as to whether a provisional budget has been prepared to this effect. These documents are also filed in the Register of Co-ownership.
It is also prudent to ask questions on the quality of sound proofing of the building because living in a condominium is the same as living in an apartment building: your neighbours are just next door! For this reason, it is wise to verify if the quality of sound proofing meets your expectations. If your seller makes declarations, you will be able to oppose them later.
When you have made your choice of an existing co-ownership property and you are ready to sign the offer to purchase, make sure that it is conditional on obtaining the following information from the vendor on behalf of the syndicate, through your professional (lawyer or notary) before finalizing your purchase:
- The Declaration of Co-ownership or the Undivided Agreement and any amendments (if need be);
- Rules recorded in the Register of Co-ownership and adopted subsequent to the publication of the Declaration of Co-ownership or the Undivided Agreement;
- Financial statements for the last five (5) years, notice of assessment, the status of the reserve fund;
- Insurance certificate of the building (in a divided co-ownership, make sure that the insurance covers both the common portions and the private portions, with exception of the improvements made by co-owners to their respective units, also civil responsibility for the administrators. Verify also the number of claims made to the insurer) and the evaluation report;
- A list of the major works planned for the next 3 to 5 years (balance sheet and status of results);
- Maintenance book;
- Recent Certificate of Location (less than five (5) years);
- Minutes of meetings for the last five (5) years;
- Become informed of the nature and status of any legal proceedings (ask for copies of these proceedings) ;
- Statement to date of your unit (Are there any outstanding amounts owed by your seller? You could be held responsible for these after the sale.).
When you receive these documents, read them! Although this may seem strange, many co-owners ask for these but few actually read them. But these documents are set up against you upon your being given a copy of said documents.
The following items should also be investigated before you finalize your purchase:
- Verify the application of the Declaration of Co-ownership (or the Undivided Agreement) by the syndicate (or association) by walking about the property (Are certain co-owners ignoring the rules of the building? All negligence discovered could, with good reason, give rise to doubts concerning the seriousness of the administration);
- Visit the property in the evening, at rush hour and on the weekend to determine the surrounding noise level ;
- Verify that the syndicate is registered with the Quebec Business Registry (Registraire des enterprises), if all the annual declarations have been provided and within the due date;
- Distinguish the common portions and the common portions with restricted use and the rights that you will have. Verify the condition of the common portions with restricted use and have a professional determine your financial obligation in the event of major repairs or replacement of these;
- Engage the services of a well known professional to carry out an inspection of the entire building, not only your unit;
- Verify the policy of the co-ownership (administration fee, deposit, usage of the elevator, etc.) with regards to renovations which you may wish to undertake;
- Have a legal professional verify if there are any legal actions taken against the syndicate or by the syndicate ;
- Verify if the vendor has carried out any renovations which could have affected the common portions or other co-owners (floors, piping, plumbing, air conditioning).
When a new co-ownership property is developed, it is the promoter’s responsibility to manage the co-ownership during the sale of the units. Then the torch is passed to the new board of directors of the syndicate (or to the manager of the association depending on the situation).
For divided co-ownerships, the Civil Code of Québec determines the deadline. Handing over the management must be done within 90 days from the day on which the promoter ceases to hold a majority of voting rights in the general meeting of the co-owners (art. 1104 C.C.Q.). This transfer of responsibility may result in disagreements and require a time of adaptation and adjustment. Condo fees may need to be increased if the provisions of the promoter were not realistic. In effect, too often the promoters, in order to promote sales, establish a minimum operations budget anticipating contributions which are too low to meet the needs of the syndicate.
For divided or undivided co-ownership, when a newly constructed development consisting of at least ten (10) units is put up for sale, the seller shall give the potential buyer a « memorandum » at the time of signing the preliminary contract. According to the terms of articles 1788 et 1789 of the Civil Code of Québec, this « memorandum » indicates the names of the architects, engineers, builders and promoters of the development, a plan of the overall project (including parking, storage), the general development plan, budget forecast, indicates the common facilities (ask to have a precise list of the services which will be available), information on the management of the immovable, an indication of the maximum number of fractions destined as rentals, a copy or a summary of the Declaration of Co-ownership (including the by-laws of the immovable) even if they are draft documents.
Verify also any construction in the vicinity and if any others are projected. They may have an effect on the existing view from your unit.
Often during the purchase of a new development, the promoter works with one single notary for all his units. Frequently it is the same notary who wrote up the Declaration of Co-ownership or the Undivided Agreement. The advantage is that he has a greater knowledge than anyone else of the property you are considering. Meanwhile, nothing obliges you to use this notary’s services if you already have your own notary. It is customary for the purchaser, if he is paying the total sale price, to select his notary. The parties may agree otherwise. However, be cautious if you have selected another notary, because when signing the contract or preliminary contract, it is often the case that the promoter has a clause to the effect that you must use the services of the notary selected by him.
In addition to obtaining the documents outlined in articles 1787 to 1789 of the Civil Code of Québec depending on their availability or as applicable, it would be useful to:
- As soon as possible after signing enquire as to the warranty on new construction (if you are purchasing a unit newly constructed). Seek the advice of a legal professional;
- Verify information on the promoter (is he registered with the Guarantee Plan for New Residential Buildings from the Régie de Bâtiment du Québec – the RBQ ?). How long has the company been in existence?;
- Verify if the syndicate has had a building inspection (acceptance of the common portions) at the end of the construction phase, if any non conformances were discovered and what actions the syndicate undertook in this regard) ;
- Before accepting your unit from the promoter, have an inspection by a well known professional. Remit a copy of the report to the promoter during the visit, and send a copy by registered mail to his offices and to the Guarantee plan administrator of your building (ACQ, Maîtres Bâtisseurs, APCHQ, etc.).
The better informed you are, the greater success you will have in purchasing and taking possession of your co-ownership home.
Happy shopping !
The information provided on this page is general in nature and cannot compensate for the need to obtain legal advice specific to a particular situation.
 Book four, title three, chapter two (articles 1012 to 1037) and chapter three (articles 1039 to 1109) of the Civil Code of Québec.
 Article 1787 of the Civil Code of Québec.
Mise à jour le Samedi, 16 Août 2014 17:25