Introduction
Are you in the market for a condo in Montreal and weighing the options of a divided or undivided co-ownership? Understanding the practical implications of these two types of co-ownership is crucial, as it can significantly impact your purchase, financing, and daily life.
When several people own the same property, it is called co-ownership. There are two forms of co-ownership: divided co-ownership and undivided co-ownership.
By default, when several people own the same property, they are not in divided co-ownership, and no declaration of divided co-ownership is published; this declaration is a legal document that specifies the rights and responsibilities of each co-owner. Without it, they are automatically in undivided co-ownership.
Whether you are a buyer, seller, or investor, this article is designed to equip you with the essential knowledge about the legal basis and implications of buying a condo for sale.
By the end, you will have a clear understanding of the specificities, the differences between a divided condo and an undivided condo, and the advantages and disadvantages of each type of condo, giving you the confidence to make an informed decision.
Understanding the legal foundations of co-ownership in Quebec
What is divided co-ownership?
Divided co-ownership, a unique form of property ownership in Quebec, involves several individuals sharing ownership of a single building, with the property divided into private and shared portions.
Each co-owner may use, enjoy, and sell their private portion. As for the common portions, each co-owner has use of them according to their share, but these common portions do not belong to them. They belong to the condominium association.
Essential characteristics of a divided co-ownership:
- Each private portion has its lot number in the Quebec Land Register.
- In some cases, the owner of the private portion (the apartment for sale) also owns a private portion of the parking and/or storage space. In this case, each private unit has a different cadastral number.
Purchasing a divided co-ownership means acquiring an exclusively private space as well as a share of the common areas (entrance hall, elevator, gym, swimming pool, terrace, etc.).
Divided co-ownership must be legally established through a declaration of divided co-ownership in the form of a notarial deed and published in the Land Register. This process ensures that the rights and responsibilities of each co-owner are clearly defined and legally binding.
Upon the establishment of a divided co-ownership, a condominium association is formed automatically. This association, a legal entity, represents all the co-owners. It plays a crucial role in guiding and protecting the rights and obligations of the co-owners, particularly concerning the management of the common areas.
The condominium association, as the management body of a divided co-ownership, is responsible for a range of functions and duties, including the maintenance of the declaration of co-ownership, the establishment of the condominium fund, and the collection of condominium fees.
- Maintain the declaration of co-ownership.
- Establish the condominium fund and the contribution to everyday expenses.
- Collect condominium fees.
- Take out insurance for the common areas and maintain a self-insurance fund.
- The condominium association has the power to create a legal mortgage on a private portion when its co-owner fails to meet their obligations.
- With the entry into force of the new law, the association must conduct a study of the contingency fund and keep a maintenance register.
What is undivided co-ownership? What does undivided co-ownership mean?
Undivided co-ownership, a concept where several individuals share ownership of a single property, offers unique benefits. Each co-owner holds an undivided share, granting them the right to use and enjoy the entire property, and to assign or sell their share. This arrangement can provide a cost-effective way to own property and can be particularly advantageous in high-value real estate markets.
There are two types of undivided co-ownership:
Legal undivided co-ownership
- Legal undivided co-ownership exists when the co-owners do not have a declaration of undivided co-ownership, which is a legal document that outlines the rights and responsibilities of each co-owner and the rules governing the property.
- The rules of the Civil Code of Quebec apply by default and govern the relationships between co-owners.
- A single legal entity: all co-owners hold a share of the property.
- Each buyer is a co-owner: there is no legal division between the units.
- In co-ownership, it is essential for co-owners to know that when one or more owners wish to sell their share (not all at the same time), the right of withdrawal applies. This right, enshrined in Article 1022 of the Civil Code of Quebec, ensures a fair process. It allows any co-owner to repurchase the share of another co-owner who has sold to a third party within a specified period, providing a sense of security and protection.
Conventional undivided co-ownership
- Unlike legal joint ownership, co-owners have a joint ownership agreement, a form of declaration of undivided co-ownership between them.
- This agreement defines the rights and obligations of the parties in their relationship.
- In the joint ownership agreement, co-owners include, in the vast majority of cases, a pre-emption clause, which requires the co-owner wishing to sell their share to offer this sale to the other co-owners before transferring it to a third party.
Divided and Undivided Co-ownership: Main Differences
What is a declaration of divided co-ownership?
The declaration of divided co-ownership consists of three parts:
- The constitutive act, which designates the cadastral deeds and lot numbers, describes the common areas, the private areas, and the percentage of common areas.
- The building regulations: This part is essential for buyers considering making an offer to purchase a condo. It lists all the building rules that the co-owner must follow, both in their private unit and in the common areas.
- Amendments to this part are not necessarily published in the registry office. It is therefore essential to ensure you have the latest version of the regulations when purchasing a condo.
- The third part is the descriptive statement of the building. It lists the easements relating to the common areas only.
Financing and Down Payment: Important Differences
Financing and down payment requirements differ depending on whether you are purchasing a divided or undivided co-ownership.
In divided co-ownership, the minimum down payment is 5% of the purchase price for a co-ownership of $500,000 or less. If the purchase price is over $500,000, it’s 5% for the first $500,000 and 10% for the excess up to $1,500,000.
In contrast, in undivided co-ownership, the minimum down payment is 20%. In addition, the mortgagor will require all co-owners to take out their mortgage with the lender.
Therefore, when purchasing an undivided co-ownership, you have no choice but to choose the bank. In addition, fewer lenders are willing to finance undivided co-ownership.
Taxes, Insurance, and Charges: Who Pays for Condominium Renovations?
In divided co-ownership, you have your tax bill for your private portion, in addition to condominium fees calculated by the condominium association, pro rata to your share of the common areas.
Condominium fees are calculated based on the expenses incurred by the property manager, as well as current and future costs forecast by the contingency fund study and the maintenance log.
The new co-ownership law, which will come into effect on August 14, 2025, will clarify the terms, particularly in terms of tax responsibilities and shared expenses.
In undivided co-ownership, since it only includes a single unit, all co-owners share municipal tax and property taxes pro rata. A contingency fund is not mandatory, and bills resulting from major renovations (roofing, electrical, plumbing, foundations, etc.) are also shared pro rata.
How to sell an undivided or divided co-ownership?
When you decide to sell your divided co-ownership, the process is straightforward and gives you complete freedom.
- You decide.
- You have complete freedom.
In the case of an undivided co-ownership, the sale is more complex:
When selling an undivided co-ownership, it’s important to offer it to the other co-owners first, as per the agreement, ensuring a fair process.
If your undivided co-ownership agreement contains a right of withdrawal, it’s a key aspect to the process when selling.
Advantages and disadvantages of the two types of co-ownership
Why choose divided co-ownership?
- The minimum down payment is lower.
- More mortgage lenders agree to finance divided co-ownership.
- The condominium association manages the building and its maintenance in a structured and regulated manner.
- The resale potential is higher, as a greater number of buyers are interested in an apartment for sale in divided co-ownership.
Disadvantages to consider
- Condominium fees are monthly and can increase over the years, mainly since laws regarding contingency funds and maintenance records apply.
- To carry out work or renovations in your home, you will need to obtain the necessary permits from the property manager.
- You have the freedom to personalize your living space without needing approval from a property manager.
- You must comply with the building’s internal regulations. Please make sure they are suitable for your lifestyle. For example, some condominiums do not allow large dogs.
Why consider divided co-ownership?
Buyers who opt for divided co-ownership do so primarily for the following reasons:
- The purchase price of an undivided co-ownership is often lower than that of a divided co-ownership.
- Buyers can partner with family or friends to purchase.
- If the co-owners get along well, management is smoother and less bureaucratic, and also less expensive.
Disadvantages not to be overlooked
- The minimum down payment is higher when purchasing an undivided co-ownership.
- Financing an undivided co-ownership is more complex.
- Resale potential is lower, as fewer buyers are interested in this type of co-ownership.
- Without a co-ownership agreement published in the land register, the risks are higher.
Quick Comparison Table (Divided vs. Undivided)
| Criteria | Divided Co-ownership | Undivided Co-ownership |
|---|---|---|
| Cadastre | Yes (separate lot per unit) | No (single lot shared among co-owners) |
| Financing | Individual mortgage | Joint mortgage for all buyers |
| Down Payment | From 5% (with CMHC insurance) | 20% or more (CMHC not available) |
| Declaration / Agreement | Mandatory declaration of co-ownership | Indivision agreement (strongly recommended) |
| Resale | Free and independent | Complex process without clear agreement among co-owners |
| Taxes and Fees | Individual municipal and school taxes + condo fees | Taxes shared proportionally, no fixed condo fees |
How to convert from undivided co-ownership to divided co-ownership?
Converting from undivided to divided co-ownership is a complex and costly process that necessitates municipal approval. It’s not a task to be taken lightly, but with the proper guidance, it can be navigated successfully.
It is a complex procedure that requires:
- The unanimous agreement of 100% of the co-owners
- A formal request and acceptance by the municipality
- The drafting of a notarized declaration of co-ownership
- Legal, surveying, insurance, and land registry fees as expected
How do I know if a building is divided or undivided?
When listing a condo for sale, the real estate broker checks:
- The deed of sale
- The land register; the declaration of divided co-ownership is published at the registry office
- Check the cadastral numbers of the private portion and the common areas; this is another way to confirm that it is a divided condo.
Who is each type of co-ownership suitable for?
Buying a condo for the first time? Opt for a divided co-ownership condo
If you’re a first-time buyer, a divided condo is a great choice. It not only makes mortgage access easier and more affordable, but also provides the supervision and maintenance you might lack in property management experience, thanks to the condominium association’s support.
Are you a savvy investor buying plexes for sale? Co-ownership could be for you
You might prefer undivided condos, but if a co-ownership contract facilitates their management, that could be a consideration.
Have you inherited a property and are members of the same family? Co-ownership can facilitate joint property management
Co-ownership allows for joint property management when you are members of the same family. But be careful, even between members of the same family, a joint ownership contract can avoid many conflicts.
Conclusion: Choosing the Right Option for Your Situation
Whether you choose divided or undivided co-ownership, it’s all about what suits your situation, personality, and expectations. Divided co-ownership, with its structured legal framework, supervised management, and accessibility to financing, is an excellent fit for most buyers.
On the other hand, undivided co-ownership, with its unique charm and aesthetic appeal, requires careful attention to legal and financial aspects.
If you’re still unsure about whether to choose an undivided or divided co-ownership, I’m here to help. Call me for a personalized consultation and let’s find the best option for you.
