Sale of an undivided co-ownership property: Attention to the right of the other co-owners
You want to sell or buy a share of an immovable held in undivided co-ownership? Did you know that the other co-owners have precedence over a potential buyer? By enlisting the services of a professional authorized by the OACIQ to carry out your transaction, the latter will have to assist you and advise you throughout the process. In addition, you will be protected by the Real Estate Brokerage Act.
The indivision agreement
The indivision agreement specifies the mode of operation and management of the co-ownership. It specifies the rights of all owners and helps administer exclusive rights of use granted to each of them (e.g.: your apartment, your private parking). To avoid legal action and potential liability for damages, make sure you understand and comply with the terms of your agreement. If in doubt, don’t hesitate to consult your broker.
Attention: several indivision agreements require that a co-owner offer his share of the immovable to the other co-owners before offering it to a third party. Some agreements even allow other co-owners to match the third party’s offer for this share, following the terms of the agreement. This is called a “pre-emptive right”.
Right of redemption
Furthermore, if the indivision agreement contains no provisions to this effect or if there is no such agreement, the buyer’s broker must inform his client that the Civil Code of Québec provides a means for co-owners to exclude a third party who has purchased a share of the immovable: this is called the “right of redemption”.
Under this right, a co-owner has 60 days following the time when he learns that the share of another co-owner has been sold to buy it back by reimbursing him for the price and the expenses paid. However, this right of redemption must be exercised within one year from the acquisition of the share by a third party.
The seller’s broker shall ensure that all the parties engaged in the transaction are informed of the rights of the other co-owners and their impact on the transaction under consideration. In order to minimize the risks, he will ensure to obtain a waiver of this right from the other co-owners as soon as the brokerage contract is taken up. It is recommended that this waiver be drawn up by a lawyer.
The buyer’s broker may want to make any promise to purchase conditional upon the seller providing a copy of this waiver to the buyer.
Forms to better protect you
To protect you, the OACIQ created forms for these situations that must be used by brokers: the Exclusive brokerage contract – Undivided co-ownership and the Promise to purchase – Undivided co-ownership.
Like all other forms of the OACIQ, they were designed to ensure transparency and consistency of transactions, so they can be carried out according to proper practices. For more information, read the article Les formulaires de l’OACIQ, des outils à mieux connaître (OACIQ forms, tools you need to be familiar with).