Canada: Divided Co-Ownerships: Significant Changes Proposed By Quebec's Bill 16

A builder or developer of residential immovables under divided co-ownership should take note of the proposed amendments to the Civil Code of Québec ("CCQ") concerning the provisions relating to divided co-ownership and sale of residential immovables. These amendments were introduced by the Quebec Minister of Municipal Affairs and Housing and are set out in Bill 16, entitled An Act mainly to regulate building inspections and divided co-ownership, to replace the name and improve the rules of operation of the Régie du logement and to amend the Act respecting the Société d'habitation du Québec and various legislative provisions concerning municipal affairs ("Bill 16").

This note serves to highlight some of the modifications put forward by Bill 16 which we believe may be relevant to a builder or developer of residential immovables under divided co-ownership. It is not an exhaustive overview of Bill 16.

Provisions related to Divided Co-Ownerships

Bill 16 requires a syndicate of co-owners to establish and keep a maintenance log which describes, in particular, the maintenance done and the maintenance required,1 to obtain, every five years, a contingency fund study establishing the sums necessary for the fund to be sufficient to cover the estimated cost of major repairs and replacement of the common portions 2 and to keep an up-to-date certificate attesting to the state of the finances of the syndicate and the condition of the immovable held in co-ownership.3 The applicable provision introduced by Bill 16 giving rise to these obligations states that government regulations will be enacted to establish the particulars of such maintenance log, contingency fund study and certificate. These proposed CCQ modifications will come into force when the first regulations enacted under the applicable CCQ provision come into force. However, co-ownerships established prior to the coming into force of Bill 16 will have three years after the first regulation made under the applicable CCQ provision comes into force to fulfill the new requirements as they apply to the maintenance log and the contingency fund study.4 In addition, the obligation of the syndicate to keep the abovementioned certificate up-to-date only takes effect from the day of the appointment of a new board of directors, after the developer loses control of the syndicate.5

Of direct concern to a developer of a co-ownership are the proposed changes to Article 1106.1 CCQ. Currently, this provision requires the developer to transmit to the syndicate, within 30 days after the special meeting held following the loss of control of the syndicate by the developer,6 the description of the private portions provided for in Article 1070 CCQ. As amended by Bill 16,7 Article 1106.1 CCQ will require the delivery of the following three additional items:

  • the maintenance log kept for the immovable and the contingency fund study;
  • if the building is new, the plans and specifications showing any substantial changes made to them during construction in comparison with the original plans and specifications;
  • and any other document or information prescribed by government regulation.

Further, the developer will be liable for any injury resulting from the failure to provide such documents and information.

The implementation of the amendments to Article 1106.1 CCQ is tied to the coming into force of regulations made under related provisions enacted by Bill 16, except for the second item listed above which will come into force with the coming into force of Bill 16.8 Further, the obligation to provide a description of the private portions, as currently set out in Article 1106.1 CCQ, will come into force on June 13, 2020 for divided co-ownerships established before June 18, 2018.9

With respect to the obligation of a developer to provide the maintenance log and the contingency fund study pursuant to amended Article 1106.1 CCQ, a particular delay is introduced for its implementation in the following circumstance. If the developer holds the special meeting required by Article 1104 CCQ within 90 days of a regulation coming into force under the amended Article 1071 CCQ (concerning the contingency fund study), then the developer will have 6 months, rather than 30 days, of the date of the special meeting to provide the syndicate with the maintenance log and contingency fund study.10

Additional notification obligations are imposed on the board of directors by Bill 16. Of interest, Bill 16 requires the board of directors to notify to the co-owners the minutes of every meeting held by the board or every resolution in writing passed by the board within 30 days of the meeting or of the passage of the resolution. Further, it provides that any co-owner or director may apply to the court to annul or amend a decision of the board of directors, if the decision is biased or was made with intent to injure the co-owners or in contempt of their rights.11 A similar notification provision is introduced by Bill 16 regarding the minutes of the general meeting of co-owners and the resolutions in writing passed by such general meetings.12 Pursuant to Article 1103 CCQ, co-owners currently have the right to apply to the court to annul a decision of the general meeting if the decision is biased, if it was taken with intent to injure the co-owners or in contempt of their rights, or if an error was made in counting the votes.

Provisions relating to the Sale of Divided Co-Ownerships

Bill 16 proposes changes to Articles 1785 to 1794 CCQ concerning special rules regarding the sale of residential immovables. Under Articles 1785 and 1787 CCQ, currently a builder or developer must enter into a preliminary contract if a natural person wishes to buy an existing or planned residential immovable under divided co-ownership to occupy it and must also give to such person a memorandum if the development comprises at least 10 dwellings. Bill 16 would eliminate the requirement that there be at least 10 dwellings, such that a memorandum is to be delivered in all circumstances.13

Article 1785 CCQ currently requires that a preliminary contract must include a stipulation permitting the promisor to withdraw his promise within 10 days after signing the preliminary contract. As amended by Bill 16,14 the provision will require that the preliminary contract also provide for the said withdrawal right of the promisor to be exercised within 10 days of receiving the memorandum required by Article 1787 CCQ, as amended.

A government regulation may prescribe additional information to be included in the preliminary contract and memorandum according to the Bill 16 amendments.15

Article 1791 CCQ, also subject to significant amendments by Bill 16, concerns the budget forecast to be prepared by the developer on the basis of one year of full occupancy of the immovable. Bill 1616 introduces an obligation on the part of the developer to reimburse the syndicate the difference between the amounts provided in the budget forecast prepared by the developer and the amounts actually incurred by the syndicate. This obligation arises where the amounts provided in the developer's budget forecast for the fiscal year during which the developer controlled the syndicate are below the amounts the syndicate incurred for the first full fiscal year after the developer lost control of the syndicate. An exception is provided if the difference is attributable to decisions of the syndicate made on or after the day a new board was appointed following the loss of control by the developer.

More stringent obligations are proposed by Bill 16 to deposits paid to a builder or developer toward the purchase of an immovable under divided co-ownership.17 Of public order, proposed Article 1791.1 CCQ would require the deposit to be protected by one or more of the following means: a guarantee plan, insurance, suretyship or deposit in a trust account of a member of a professional order determined by governmental regulation. This obligation to protect deposits will come into force with the coming into force of Bill 16, except for the deposit in a trust account alternative which is tied to the coming into force of the first regulation made under said Article 1791.1 CCQ.18

Currently, Article 1793 CCQ allows for a sale of a residential immovable to be annulled by the buyer, if the sale is not preceded by a preliminary contract and provided the buyer shows he suffered serious injury therefrom. Bill 1619 would extend this right to a buyer of a fraction of an immovable under co-ownership who does not receive a memorandum or who receives a memorandum containing errors or omissions. Again, the buyer may apply for the annulment of the sale and claim damages provided he suffers serious injury therefrom. The action must be brought within 90 days of the sale.

Footnotes

1 Bill 16, section 32.

2 Bill 16, section 33.

3 Bill 16, section 35.

4 Bill 16, section 137.

5 Bill 16, section 35.

6 As required by Article 1104 CCQ.

7 Bill 16, section 54.

8 Bill 16, section 147(6).

9 Bill 16, section 147(7).

10 Bill 16, section 141.

11 Bill 16, section 40.

12 Bill 16, section 50.

13 Bill 16, section 57.

14 Bill 16, section 55

15 Bill 16, sections 56 and 58.

16 Bill 16, section 59.

17 Bill 16, section 60.

18 Bill 16, section 147(10).

19 Bill 16, section 61.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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