Undivided Co-ownership and Shares: When It Isn't a Condo

Most apartments sold as condos in Quebec are held in divided co-ownership: your client owns a unit and a share of the common portions, and a syndicate (syndicat de copropriétaires) runs the building. But two other forms are sold alongside them, often described the same way: undivided co-ownership, and shares in a corporation that owns the building. Each comes with its own documents, its own financing and its own risks, and the protections that now apply to divided co-ownership don't apply to either.

Your client will rarely know the difference, and listings don't always get it right. Establishing which form you are dealing with comes before anything else in the file.

Undivided co-ownership

Here your client buys a percentage of the whole building, shared with the other owners, rather than a unit of their own. There is a single lot and a single tax bill for the building. There is no syndicate. How the building is run, who uses which apartment, how costs are shared and how a share can be sold are set by an agreement among the owners, the convention d'indivision.

That agreement is not required by law, but without it the arrangement rests on the Civil Code's general rules, which were not written for an apartment building. Its quality is most of what protects your client, so it is the first document to read, along with whether it has been published at the land registry.

Three points deserve particular attention.

1. Financing is harder. Buyers typically need at least 20% down, and owners are often required to borrow from the same lender as the others.
2. The title can be precarious. Under article 1022 of the Civil Code, the other co-owners can buy out a share sold to a third party, within 60 days of learning of the sale and no later than a year after it, unless a published agreement gives them a right of pre-emption instead. A buyer who doesn't check this can find their purchase undone.
3. The new protections don't apply. The attestation, the maintenance log (carnet d'entretien) and the contingency fund study (étude du fonds de prévoyance) are rules for divided co-ownership. In an undivided building, whether anyone is planning and saving for major work depends entirely on what the owners have agreed to.

Shares

In this structure, a corporation owns the building, and your client buys shares in it, together with a lease giving them exclusive use of a specific apartment.

OACIQ is clear that this is neither divided nor undivided co-ownership, and that a broker should never describe it as either. Your client does not become the owner of the apartment. They become a shareholder and a tenant.

That changes a lot. The governing documents, the shareholders' agreement and the corporation's by-laws, are not published at the land registry; you have to obtain them from the corporation or the seller. A lender cannot take an immovable hypothec on the apartment and will need another form of security. A court has held that the legal warranty of quality doesn't run from the seller of the shares, so your client's recourse for hidden defects lies with the corporation, not the seller. Special assessments (cotisations spéciales) are voted by shareholders. The transaction may also fall under securities law as well as brokerage rules, and OACIQ recommends involving a specialized lawyer rather than relying on standard forms.

Side by side

How to tell which one it is

Don't rely on the listing. Check the land registry: a separate lot for the unit points to divided co-ownership; a single lot for the building with the seller holding a fractional share points to undivided co-ownership; and if the seller owns shares and holds a lease, there is no lot for the apartment at all. Then ask for the governing document that matches: the declaration, the co-ownership agreement, or the shareholders' agreement and by-laws.

For your client

Sources

• OACIQ, Undivided co-ownership
• Civil Code of Québec, art. 1022
• OACIQ, Co-ownership by shares (securitization)