Steps of a conversion

Municipality

Even if it is possible to do so after the purchase, it is a good idea for the buyer to make sure in advance that the municipal by-laws allows the conversion of the immovable.

The buyer, with the help of his broker, should check whether or not the municipality requires a certificate of conformity. The broker should advise the buyer to make the promise to purchase conditional upon this verification and the obtaining of this certificate if a municipal regulation requires it. Some municipalities require that the project comply with the regulation restricting conversions and be officially authorized. The buyer should be advised that there is no guarantee that the municipality will approve the project and that there will be delays. It is important to check with the municipality to find out what these delays might be before making it a condition of the promise to purchase.

Leases

Before going ahead with the purchase, the buyer and his broker should always review the terms of the leases to determine if they are suitable. As this information is particularly sensitive, it is recommended that Annex DL be used to protect the personal information contained in the leases.

Notice of intent

Once the immovable becomes the property of the buyer, the latter must send each tenant a Notice of intent to convert a rental residential immovable to divided co-ownership form, in accordance with the model provided for in the Act. The buyer must provide a copy of this notice to the Administrative Housing Tribunal. The form is available on this organization’s website. The right of tenants to maintain occupancy is strengthened at this stage, as repossession of the dwelling is no longer possible after the Notice of intent has been sent, except in rare cases.

Island of Montréal

On the Island of Montréal, the application to the municipality is possible only if a copy of the Notice of intent to convert has been received by the Administrative Housing Tribunal.

The owner must then obtain an exception to the conversion ban. This exception is granted by resolution of the borough or city council. The buyer should be advised that the time frame for obtaining an authorization is quite long, as councils generally only meet once a month. In addition, there is no guarantee that the municipality will authorize the project. If the client finds these constraints acceptable, the broker should advise him to make his promise to purchase conditional upon obtaining the exception.

Application for authorization

The owner must then file an application for authorization to convert with the Administrative Housing Tribunal within six months of the later of the Notice of intent or the municipal certificate. The application must be filed with the Administrative Housing Tribunal along with the prescribed fee, which varies depending on the number of dwellings. The application must be notified to each tenant and co-tenant, individually if applicable, at the applicant’s expense.

Hearing

Following the application, a hearing before the Administrative Housing Tribunal will be held. The applicant or his representative must be able to demonstrate all the facts pertaining to the application and all the circumstances surrounding the conversion through testimony and physical evidence.

The Act requires that a sign be posted in front of the immovable. The sign must state, among other things, that any person may make written representations regarding the application within ten days of the posting or publication of a public notice, if applicable.

The Administrative Housing Tribunal will send a copy of the decision to the parties, as well as to each of the tenants identified on the list attached to the application. The Act requires that the tribunal’s decision include the names of all tenants and their unit numbers whose dwelling unit can no longer be repossessed. Once the authorization to convert has been obtained, the owner:

• will have one year to have the declaration of co-ownership published in the Land register. After one year, the authorization will become null and void;
• must file a cadastre for the private and the common portions, drawn up by a land surveyor.

Sale of divided dwellings

Once the immovable is converted, the applicant, who is now the owner of several divided units, will likely want to sell them. If the owner uses a broker to sell the units, the broker must inform the client that two disclosures about tenant-occupied units will have to be made to the buyers:

• Existing tenants have priority to purchase their units. The owner may not conclude the first sale of a unit with a person before giving the tenant the opportunity to purchase the unit at the same price and on the same terms as those agreed to with the other person.
• Tenants retain the right to maintain occupancy for as long as they wish provided that they meet their obligations. Thus, the buyer will have to respect the rights of the tenant.
• In addition, the buyer’s broker must ensure that the selling owner is able to give the prospective buyer, before the first sale of each unit of the immovable, an expert report on the condition of the immovable and an information circular on the immovable sold, as required under the Act.

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