From undivided co-ownership into divided co-ownership: marketing of an immovable being converted

Sooner or later, a broker can be called upon to market an immovable held in undivided co-ownership, which is being converted into a divided co-ownership. Since these two types of co-ownership have significant differences, it is essential that the information published in the information dissemination services, such as Centris, be clear and properly transmitted to avoid any ambiguities for both the consumer and the broker collaborating in a transaction.

Here are the marketing rules of an undivided co-ownership being converted into a condo and the statements that must be included in the brokerage contract and promise to purchase forms and in the detailed description sheet of the immovable.

It is important to note that, as long as the conversion is not formalized, the immovable remains an undivided co-ownership and the forms to be used are those relating to this type of co-ownership.

Completing the brokerage contract

If the seller is a natural person, the broker must use the mandatory form Exclusive brokerage contract – Undivided co-ownership – Share of a chiefly residential immovable held in undivided co-ownership.

In addition, the sale of an immovable being converted has some specific features that should be reflected in the brokerage contract. For instance, it might happen that:

• the seller undertakes to pay all costs to be incurred for converting the immovable into a divided co-ownership (list these costs, including refinancing fees, fees that may be required by a municipal authority or other for conversion and legal fees);
• the notary is designated by the seller;
• the buyer’s mortgage financing must be obtained from the seller’s financial institution (indicate the financial institution) and possibly through the mortgage broker designated by the seller.

Thus, any brokerage contract must include such specific features, if any.

Among the documents to be placed on record, the broker will ensure to have a certificate of location with an area survey for the share and the indivision agreement, if there is one.

The description sheet and the promise to purchase

Good news! For a marketing to be effective and consistent with reality, it is now possible for a broker to advertise an undivided co-ownership in the process of conversion as a condo, provided that the description sheet includes clear and accurate information about the conversion process underway and the resulting specific features, namely:

• The immovable held in undivided co-ownership is being converted into a condo;
• The property assessment and the municipal and school taxes on the description sheet are those of the immovable before conversion;
• Once the conversion is completed, the assessment roll will be reviewed and the municipal and school taxes will be determined for each condo unit (private portions). The taxes, to be completely borne by the buyer, will possibly be higher.
• The undivided share is XX%;
• A certificate of location with an area survey for the share is available;
• An indivision agreement exists and is on record.

Other examples of relevant information:

• The costs of converting an immovable into a divided co-ownership shall be borne by the seller. Otherwise, it should be indicated that these costs will be borne by the buyer. (in either case, list these costs, including refinancing fees, fees that may be required by a municipal authority or other for conversion and legal fees);
• The buyer shall pay legal fees charged for his condo unit (deed of sale or transition) upon conversion of the undivided co-ownership into a divided co-ownership, if applicable;
• The buyer’s financing shall be obtained from (indicate the financial institution) and possibly through the mortgage broker designated by the seller;
• If applicable, the notary will be the one designated by the seller (indicate the name of the notary designated by the seller).

This information must be reproduced in the promise to purchase. The promise shall also include a clause stipulating that the buyer agrees to participate actively in the conversion of the immovable into a divided co-ownership and waives renting his apartment until the conversion is formalized, as soon as possible and with diligence. If the buyer resells his undivided co-ownership before conversion, he shall include the same conditions in his transaction.

To conclude, the legal implications of a change in the ownership status are numerous and sometimes complex. Remember that a broker must always take into account the limits of his abilities and knowledge when engaging in a brokerage transaction. If the conversion of an immovable raises more questions than answers, then he must not hesitate to team up with a broker who already has the required knowledge in this context or simply refer his client to him (referral), before even representing a client within the framework of a brokerage contract or transaction.

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