The blog of real estate
Rights and obligations of the undivided co-ownership
May 9th, 2015
What type of co-ownership is this?
Where a building is owned by a group of persons without being physically divided into separate lots, that building is possessed in undivided co-ownership. All of them thus become joint owners of a building according to the size of the share they acquired in the building concerned.
Where a building is owned by a group of persons without being physically divided into separate lots (private and common areas) that building is possessed in undivided co-ownership. All of them thus become joint owners of a building according to the size of the share they acquired in the building concerned.
The concept of undivided co-ownership is relatively broad. In addition, this applies to couples who buy a home, as well as to family members who inherit a property, or to three people who buy a triplex together. In these three examples, all of them are undivided co-owners.
Unlike the divided co-ownership (condo), no land operation applies or is necessary. Each of the joint owners possesses an undivided property right over the whole building and has tenure rights over his apartment. He thus becomes part owner of the inhabited apartment. The same is true for apartments occupied by his neighbours.
The joint ownership agreement
Divided co-ownership is compulsorily subject to a notarised contract (Co-ownership declaration). Undivided co-ownership does not have to comply with this requirement. However, making such an agreement has advantages. Why? It’s quite simple: if no agreement has been reached between the owners (i.e., the co-owners), none of them will be able to claim an exclusive right to occupy the part of the building they are occupying. Currently, the Civil Code of Québec does not quite cover the rights and obligations of undivided co-owners. They are thus exposed to situations of conflict.
*The solution: A joint ownership agreement signed by all the co-owners in order to create what notaries call organized undivided co-ownership.
A joint ownership agreement has many uses, such as describing the parts exclusively set aside for the use of the co-owners, such as apartments or parking lots. The agreement can and must lay down the rules concerning the functioning and management of the joint ownership in order to harmonise relations between the co-owners. It can be renewed at any time. On the other hand, this agreement cannot exceed 30 years.
Important point: In order for the joint ownership agreement to be binding for any new co-owner, the co-owners must publish it at the land registry, except when the rights in that agreement have been transferred to him and the obligations therein assumed by him.
Obligations of the co-owners
By its nature, this type of property subjects the co-owners to several so-called joint liabilities. This is the case for municipal and school taxes, for which the co-owners are jointly and severally responsible for the obligation.
In an undivided co-ownership, financial institutions now agree to finance co-owners individually. The co-owners have as collateral, a cross-mortgage on each of the dwellings to ensure that everyone’s obligations are fulfilled. I will suggest at this point that you check with a notary to know how these mortgages work.
* The establishment of such a joint ownership agreement provides for protective measures to guarantee the fulfilment of various obligations between co-owners. However, it must be noted that this type of ownership can be risky for the co-owners when one of them has financial problems.
It is important to know that the National Bank of Canada and the Desjardins Fund (Caisses Desjardins) are currently offering “limited liability” loans. These loans are separately guaranteed on the undivided shares and respective tenure rights of each of the co-owners. In such a situation, the intervention of the other co-owners will not be required (which is important) and the creditor will not be able to take action against the shares and rights linked to the other co-owners. These loans are granted under certain conditions, including the publishing of a joint ownership agreement in the land register, containing the proper guarantee clauses.
It is important to know that in a situation of joint ownership with someone other than one’s spouse, it is impossible for an owner to regain possession of residential accommodation. However, this protection to which the main tenant is entitled does not apply to a subtenant.
Finally, I recommend that you seek information from a notary concerning the specifications of an undivided co-ownership.
There is an excellent website that has a lot of information about the undivided co-ownership: condolegal.com