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Selling or purchasing an undivided co-ownership property

 

 

When selling or purchasing a share in an immovable held in undivided co-ownership, it is important to understand that the immovable belongs to several owners who may have a priority right over the potential buyer. 

Key features of undivided co-ownership

  • The immovable is collectively owned by several undivided co-owners
  • Unlike divided co-ownership, there is no syndicate of co-owners
  • An indivision agreement is optional but highly recommended
  • Once drafted, the indivision agreement establishes the operating rules among the co-owners
  • In particular, this agreement helps:
    - Define the rights of exclusive use (e.g. an apartment, a parking space, a courtyard)

    - Specify the terms and conditions for the resale of a share, such as the obligation to offer it first to the other co-owners

    - Establish the rules for managing the building
  • The undivided ownership agreement must be published in the Land Register of Québec to make its rules binding on any new owner
  • The immovable has only one lot number (cadastre) 
  • The costs associated with the building—such as maintenance, repairs, municipal taxes, and school taxes—are shared among the co-owners based on each person's share

Indivision agreement

The indivision agreement specifies the mode of operation and management of the co-ownership, as well as the rights of all owners. 

Attention to the right of the other co-owners

To prevent legal action and potential liability for damages, it is essential that clients fully understand and comply with the terms of the agreement. If in doubt, they can ask their real estate broker.

Right of pre-emption 

In general, indivision agreements require that a co-owner offer his share of the immovable to the other co-owners before offering it to a third party. Some agreements even allow other co-owners to match the third party’s offer for this share, following the terms of the agreement. This is called a “pre-emptive right.”

Right of withdrawal

Under this right, a co-owner has 60 days from the time he learns that another co-owner's share has been sold to a third party to buy it back by reimbursing the sale price and associated costs. However, this right of withdrawal cannot be exercised more than one year after the acquisition of the share by a third party.

The real estate broker's role

 

The seller’s broker
The seller’s broker shall make the required verifications and ensure that all the parties engaged in the transaction are informed of the rights of the other co-owners and their impact on the transaction. To minimize risks, he can ensure that a waiver of the right of pre-emption or withdrawal is obtained from the other co-owners as soon as the brokerage contract is signed. It is recommended that this waiver be drawn up by a lawyer.

 

The buyer’s broker
The buyer's broker has a key role to play in protecting his client's interests.  In particular, he must inform and advise the buyer on the implications of undivided co-ownership, emphasizing the associated risks. He must recommend that the relevant documents be obtained to carry out the required verifications.  If there is no indivision agreement, or if such an agreement does not contain a right of pre-emption, the buyer's broker must inform his client that the Civil Code of Québec provides a mechanism (right of withdrawal) for co-owners to exclude a third party who has purchased a share in the immovable. He must advise his client to include a condition in the promise to purchase requiring the seller to provide a copy of the waiver.

To read on Protégez-vous (in French only) :

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Reference number
202666
Last update
June 22, 2020