The right of undivided co-owners to exclude a potential buyer

(Update of the article published on March 19, 2007)

A real estate broker or agency entrusted with the sale of a co-owner’s share in an undivided co-ownership property must know that the other co-owners have the right to exclude a potential buyer.

In this regard, it is important first to take a look at the indivision agreement that governs the relationship between co-owners. These agreements often require that a co-owner offer his share to the other co-owners before offering it to a third party, or provide for the other co-owners to be able to match the third party’s offer for this share, following the terms of the agreement: this is called the “pre-emptive right”. A seller who decides to ignore these terms exposes himself to legal action and potential liability for damages.

Even if the indivision agreement contains no provisions to this effect or if there is no such agreement, the broker must inform any potential buyer 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”. The Civil Code gives the co-owners the right to buy back the share sold to a third party by reimbursing him for the price and the expenses paid. A co-owner has 60 days following the time when he learns that the share of another co-owner has been sold to exercise this right. However, this ''right of redemption'' must be exercised within one year from the acquisition of the share by a third party (Art. 1022 C.C.Q).

Whether resulting from the indivision agreement or the Civil Code of Québec, it is important that the seller and any potential buyer be informed of the rights of the other co-owners and their impact on the transaction under consideration. In order to minimize the risks, it is recommended that a waiver of this right be obtained from the other co-owners as soon as the brokerage contract is taken up. This waiver should be drawn up by a lawyer. If it is not known whether such a waiver exists, it is suggested to make any promise to purchase conditional upon the seller providing copy thereof to the buyer. In these respects, clauses were provided for in the mandatory forms Exclusive brokerage contract – Undivided co-ownership (clause 8.1) and Promise to purchase – Undivided co-ownership (clause 10.1).
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