By Mtre Gérald Denoncin
THE LITTLE-TALKED-ABOUT CHALLENGES.
On December 13, 2018, sections of the Act to improve primarily the supervision of the financial sector, the protection of deposits of money and the operating regime of financial institutions, commonly known as Law 141, came into force, referring to the draft number. These included new articles 1074.1 and 1074.2 of the Civil Code of Quebec (hereinafter "CCQ"). These articles have raised a certain amount of concern, not to say a definite stir, within divided co-ownerships and their directors and managers. Indeed, they are likely to increase the burden on a syndicate of co-ownership in the process of recovering sums incurred for deductibles and repairs to damage caused to property in which it has an insurable interest, furthermore limiting the amount recoverable and the scope thereof.
These articles are as follows:
1074.1. When a loss occurs which falls under the coverage provided for by a property insurance contract entered into by the syndicate and the syndicate decides not to avail itself of the insurance, it shall with dispatch see that the damage caused to the insured property is repaired.
A syndicate that does not avail itself of insurance may not sue the following persons for the damages for which it would otherwise have been indemnified by the insurance:
- a co-owner;
- a person who is a member of a co-owner’s household; or
- a person in respect of whom the syndicate is required to enter into an insurance contract to cover the person’s liability.
1074.2. The sums incurred by the syndicate to pay the deductibles and make reparation for the injury caused to property in which the syndicate has an insurable interest may not be recovered from the co-owners otherwise than by their contribution for common expenses, subject to damages it can obtain from the coowner bound to make reparation for the injury caused by the co-owner’s fault and, in the cases provided for in this Code, for the injury caused by the act, omission or fault of another person or by the act of things in the co-owner’s custody.
Any stipulation which is inconsistent with the provisions of the first paragraph is deemed unwritten.[1].
In other words, the syndicate cannot recover more than the amount of the deductible applicable to the claim, whether or not it has decided to avail itself of its insurance.
In addition, the co-owner must prove the fault of the co-owner liable to repair the damage caused by his fault, or the act or fault of another person, or the act of property in his custody, in the cases provided for in the Civil Code of Québec. In so doing, the legislator has put an end to the no-fault liability clauses generally found in the vast majority of Declarations of Co-ownership. Such clauses are now deemed unwritten.
While these new articles seem to clearly define the management of a claim in co-ownership and the recovery of sums incurred by the syndicate as a result, one player has been omitted from the equation: the tenant. This raises fundamental questions about the rights of the syndicate and its insurer to recover amounts incurred following a loss from a tenant whose fault or negligence causes damage to property in which the syndicate has an insurable interest. In addition to the application of certain clauses contained in many declarations of co-ownership, procedural issues relating to competent jurisdictional forums also merit particular attention.
THE TENANT IS A THIRD PARTY TOWARD THE SYNDICATE:
A syndicate that does not have insurance coverage for damages for which it would otherwise have been indemnified by such insurance cannot sue the categories of persons referred to in article 1074.1 CCQ to recover the sums incurred to repair such damages. This prohibition applies whether or not the syndicate decides to take out insurance. In other words, any amount not covered by the syndicate's insurer, i.e. the applicable deductible, constitutes sums incurred by the syndicate for the payment of deductibles or the repair of damage to property in which it has an insurance interest. It may not pursue recovery from such persons, subject to the provisions of article 1074.2 concerning a co-owner at fault or presumed to be at fault.
The tenant, however, does not fit into these categories. In fact, apart from the obvious fact that he is not the co-owner, he is also not a person who is part of a co-owner's home, which is defined as any natural person who habitually resides under the roof of a co-owner, regardless of sex or marital status, to the exclusion of a tenant.[2]Furthermore, it is not a person in respect of whom the syndicate is required to take out insurance to cover liability, namely the members of its Board of Directors, the manager and officers of the meeting and other persons responsible for its smooth operation.[3].
Furthermore, he is not, in the cases provided for in the Civil Code of Québec, another person whose fault or wrongful act enables the syndicate to obtain damages from a co-owner for the damage caused by them, namely a person referred to in articles 1457 and 1459 to 1464 CCQ.
- A minor in respect of whom the co-owner exercises parental authority or in respect of whom, without being the holder of parental authority, the co-owner has been entrusted with the custody, supervision or control of the child.
- The adult of full age who is deprived of reason and for whom he or she is responsible, acting as guardian, mandatary or otherwise.
- His agent in the performance of his duties.
With all due respect to the contrary opinion, the syndicate cannot, in our opinion, seek reparation from a co-owner for his loss due to the fault of his tenant, not even because of a clause in the declaration of co-ownership, such as a joint and several liability clause, which is deemed unwritten under article 1074.2 (2) CCQ. More on this below.
Finally, it should be added that in terms of leasing, the lessor is not liable to repair damage caused by the lessee to third parties. He is liable only to other tenants, if any.[4]. The syndicate is not another tenant.[5].
Starting from the postulate that the legislator does not speak in silence, there is no doubt that if he had also wanted to exclude the tenant from recourse by the union against him, mention would have been made in the law. This is not the case.
It follows that, the tenant being a third party[6] vis-à-vis the syndicate, and not being one of the persons with respect to whom action by the union is legally prohibited, the latter may, on an extra-contractual basis, recover directly from the tenant whose fault or negligence caused caused harm, the sums incurred to repair property in which the union has an insurable interest. The opposite would also result in a legal void exempting the tenant from the consequences of his fault or negligence.
Furthermore, in our opinion, the syndicate can sue the lessee for damages in excess of the applicable deductible if the lessee chooses not to avail himself of his insurance. In our opinion, this limit only applies to persons covered by article 1074.1 CCQ, from which, as we have just explained, the tenant is excluded.
In this context, and for the same reasons, the syndicate's insurer may also be subrogated to the rights of the syndicate against the tenant, the author of the prejudice, up to the amount of the indemnities it has paid.[7].
In practice, however, a problem remains. Unlike co-owners, tenants are not required by law to take out civil liability insurance.[8]In practice, recovery of sums incurred by the syndicate remains laborious. We believe that the government should legislate to require all tenants to take out such insurance, at the very least when the rental unit is part of a fractional co-ownership.
In a future article, we'll look at implementation and the subtle, perilous and convoluted procedural exercise of recourse involving the tenant in this circumstance...
[1] This is article 1074.2 CCQ as amended on March 17, 2020. Its first version further limited the possibility of the Syndicate, with regard to the damages that it can obtain from the co-owner required to repair, to the proof of his sole personal fault.
[2] Yves Joli-Cœur, Dictionnaire québécois de la copropriété : 850 définitions, 2e édition, Wilson & Lafleur, 2023.
[3] Art. 1073 (2) CCQ
[4] Art. 1858 et 1859 CCQ
[5] Syndicat des copropriétaires TOD 1 c. Xu, 25 mai 2022, QCCQ, 3694
[6] Industrielle Alliance, Assurance auto et habitation inc. c. Whirlpool Canada, 7 juillet 2021, QCCQ, 7405.
[7] Art. 2474 CCQ ; Industrielle Alliance, Assurance auto et habitation inc. c. Whirlpool Canada, op. cit.
[8] Art. 1064.1 CCQ.
