Undivided co-ownership

Undivided co-ownership

Undivided co-ownership is based on a principle different from that of divided co-ownership. In this type of ownership, the immovable belongs to several persons, called undivided co-owners. No undivided co-owner is the exclusive owner of a specific part of the immovable. Instead, each holds a share in the whole of it.

For example, if three persons buy a triplex together and each contributes in equal shares to its acquisition, they become undivided co-owners of the whole building. Even if one of them occupies the second-floor unit, that unit does not belong to that person exclusively. The three undivided co-owners remain co-owners of each of the units and of the other components of the building.

In this example, each undivided co-owner holds a one-third share of the building. The rights and obligations of each are generally set out in an indivision agreement, which may provide, in particular, for the terms of occupancy of the immovable, the sharing of expenses, the rules applicable in the event of a sale and the dispute resolution mechanisms.

Before acquiring an immovable in undivided co-ownership, it is strongly recommended that you discuss with your notary the drafting of an indivision agreement adapted to your situation. This document helps to protect the interests of each of the undivided co-owners and to prevent a number of difficulties that may arise over time.

Formalities

Undivided co-ownership arises as soon as several persons together acquire the same property. In the case of an immovable, however, it is strongly recommended to enter into an indivision agreement in order to clearly set out the rights and obligations of each of the undivided co-owners.

This agreement may provide, in particular, for the terms of occupancy of the immovable, the sharing of expenses, the rules relating to work, the mechanisms applicable in the event of a sale and the procedures for resolving certain disputes.

When it relates to an immovable, the indivision agreement may be published in the land register so that it may be set up against third persons and protect the rights of the undivided co-owners.

For anyone considering buying a residence, a duplex, a triplex or a cottage with a spouse, a family member or a friend, the indivision agreement is an essential preventive tool. It helps to ensure the harmonious management of the immovable and to avoid a number of difficulties that may arise over time.

Financing

In undivided co-ownership, each undivided co-owner may generally hypothecate their share of the immovable without the consent of the other undivided co-owners. The hypothec then charges only the rights of the undivided co-owner who granted it and not those of the other co-owners.

The other undivided co-owners are therefore not personally liable for the obligations contracted by their co-owner towards that co-owner’s hypothecary creditor. However, a default in payment by an undivided co-owner may, in certain circumstances, have repercussions on the co-ownership and lead to the exercise of recourses provided by law.

The Civil Code of Québec also grants the undivided co-owners certain protective rights when one of them alienates or hypothecates their share or when a third person becomes likely to acquire rights in the indivision.

It is for this reason, in particular, that a well-drafted indivision agreement is essential. It makes it possible to provide for protection mechanisms adapted to the situation of the co-owners and to govern the consequences of a default in payment, a sale or financing entered into by one of the undivided co-owners.

Sale

In principle, each undivided co-owner remains free to sell or transfer their share of the immovable, subject to any restrictions provided for in the indivision agreement.

However, the Civil Code of Québec generally grants the other undivided co-owners an important protection mechanism. In certain circumstances, they may exercise a right of redemption allowing them to take the place of the acquirer by reimbursing the acquirer for the price paid and the costs incurred.

This right is intended, in particular, to prevent an unwanted third person from becoming a co-owner of the immovable without the consent of the other undivided co-owners. It must, however, be exercised within the time limits provided by law.

A well-drafted indivision agreement may also provide for additional mechanisms, such as a right of pre-emption or specific terms of sale, in order to ensure greater stability of the indivision and to protect the interests of each of the co-owners.

Before acquiring an immovable in undivided co-ownership, it is therefore recommended that you consult your notary in order to put in place an agreement adapted to your situation and to the objectives of all the undivided co-owners.

Duration

The indivision agreement generally cannot provide for the indivision to be maintained for a period exceeding thirty years. It may, however, be renewed when it expires if the undivided co-owners wish to continue their common project.

This agreement plays an essential role since it makes it possible to establish the rules applicable to the occupancy of the immovable, the sharing of expenses, the work, the resale of a share and the resolution of certain difficulties that may arise between the undivided co-owners.

When carefully drafted, the indivision agreement is a particularly effective preventive tool, promoting the harmonious management of the immovable and protecting the interests of each of the co-owners.

Content of the agreement

The indivision agreement may provide, in particular, for the duration of the indivision, the rights and obligations of the undivided co-owners regarding the occupancy of the immovable, the sharing of expenses, maintenance and renovation work, as well as what becomes of the improvements made to the property.

It may also govern the conditions for the sale of a share, the decision-making mechanisms, the rules for administering the immovable and the terms applicable upon partition or at the end of the indivision.

Because every real estate project is unique, the indivision agreement must be adapted to the particular needs of the co-owners. A well-drafted agreement makes it possible to prevent a number of difficulties and helps to ensure the harmonious management of the immovable over time.

Your notary can advise you on the content of this agreement and ensure that it adequately reflects the objectives and interests of each of the undivided co-owners.