Updated March 8, 2023
If you are looking to purchase a condo in Quebec, you’ll need to know about divided and undivided co-ownership. Divided co-ownership is the most common type, but you also need to be aware of undivided co-ownership. The type of co-ownership impacts aspects like insurance, finances, taxes, and your ability to sell or rent the unit.
Read on to learn about the different types of co-ownership, how they work, and the advantages and disadvantages of both divided and undivided co-ownership.
According to the Civil Code of Quebec, co-ownership is ownership of the same property, jointly and concurrently, by several persons, each of whom is privately vested with a share of the right of ownership.
Divided co-ownership is where the right of ownership is apportioned among the co-owners in fractions each comprising a physically divided private portion and a share of the common portions.
But what exactly does that mean in plain English?
Well, it means many things. But, let’s take a look at the most important elements:
Basically, it means you are purchasing a unit (like a condo or apartment) in a building that has been divided into several units or fractions. Some of these parts are private (such as your unit and some parking spaces) and others are common (such as a swimming pool or tennis courts).
Your unit is for your own exclusive use. For example, you can sell it as you wish. You can also make minor changes to it, as long as they do not affect the building’s structure or violate the building’s regulations.
Your condo unit will also have its own lot number (like a house) and you will pay your own municipal taxes.
As a co-owner, you will also have access to the common areas, such as a party room, courtyard, or gym. However, you will also have to pay a fraction of the maintenance of these areas through what is known as a monthly condo fee or maintenance fee, which is determined by the number of co-owners, the size of the building, its common areas, and its services.
The Civil Code of Quebec requires condo buildings to have a contingency fund for unforeseen events.
This fund is earmarked to finance work that may be required in the building’s common areas. This sum is a minimum of 5% of the common expenses paid by the co-owners, and is separate from the money used for regular maintenance of the common areas.
The declaration of co-ownership is a notarized document that sets out the rules governing the divided co-ownership. It will tell you things like whether pets, parties or barbecues are allowed, as well as the amount of your condo fees.
The declaration also includes the building’s regulations and technical information, like lot numbers.
Most importantly, the document establishes the management of the building, which is carried out by the syndicate or management agent. This is a moral person who oversees the maintenance, administration and execution of any work needed on behalf of the building, such as repairs or renovations.
The board of directors is the part of the syndicate that holds group executive and decision-making power. Elected annually by all the co-owners, the board is responsible for preparing a budget, setting out the common fees, and determining the amounts to be paid into the contingency fund. The board of directors will also negotiate contracts with service providers for the building.
If you purchase a condo held in undivided co-ownership, you are buying a share or percentage of the entire building. Under undivided co-ownership, the property is not divided into private and common portions. The right of ownership of the building, along with its operating costs, is shared by several people.
Additionally, a single lot number is assigned to the entire building and not to the individual units. The same applies to taxes and common fees, which are shared proportionally by all the co-owners.
In order to obtain a mortgage for an undivided property, the co-owner must make a down payment of a minimum of 20% of the value of their share of the co-ownership.
In undivided co-ownership, an indivision agreement is recommended but not mandatory.
This agreement defines the rights of each co-owner and the management of the property, and may include the following information:
The indivision agreement will also state whether an individual co-owner is free to sell their unit or must offer it to the other co-owners first. This is called a pre-emptive right or right of first refusal (section 1022 of the Civil Code of Quebec).
In undivided co-ownership, the co-owners agree on the amount to be paid annually to the contingency fund and building maintenance. This may also be included in the indivision agreement.
With respect to managing the building, there is no syndicate or board of directors. In undivided co-ownership, the co-owners administer the property jointly and decisions are made by a majority of the co-owners. However, for things like selling a unit, a unanimous decision is necessary.
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In divided co-ownership, each condo owner must take out their own insurance for their unit, while the syndicate insures the entire building.
Typically, an individual condo owner’s insurance will cover things like civil liability, furniture and improvements made to the unit. The syndicate’s master policy will cover things like the common areas of the building and third-party liability.
As of April 2022, the Civil Code provides that a self-insurance fund be set up to cover the costs of a claim that would not be covered by the syndicate’s master policy, including deductibles. This fund is provided by the co-owners and becomes the property of the syndicate. The board of directors assesses and determines the minimum annual contribution amount.
In a building with more than two co-owners, the co-owners must take out insurance that covers the building exclusively, and each co-owner occupying the building must take out tenant insurance for their goods and furniture. The above-mentioned law requiring a self-insurance contingency fund does not apply to undivided co-ownership.
Financially, you only need to put down 5% for a down payment to purchase a condo in a divided co-ownership setting. However, if your down payment is under 20%, you will have to take out mortgage loan insurance.
In most cases you can rent out your unit in divided co-ownership, whether it’s for investment purposes or if you plan on being away for a lengthy period.
In divided co-ownership, you’ll pay more for services through condo or maintenance fees. These fees are used to maintain, repair, and manage common areas like stairs, elevators, and gyms. You will also have to pay into a separate self-insurance fund to cover deductibles payable by the syndicate after a loss.
In undivided co-ownership, the fees and taxes are shared between the co-owners, which generally leads to lower expenses. Unlike divided co-ownership, condo fees are optional, and the co-owners, rather than a syndicate, decide together on the amount to pay into a contingency fund.
Unlike divided co-ownership, you cannot rent out your unit. As well, all the co-owners must take out their mortgage from the same financial institution, even though each co-owner has their own individual mortgage. This eliminates the ability to shop around for the best mortgage on the market.
Want to learn more? Visit our Condo Owner resource centre for more helpful articles about the intricacies of condo life. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
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