Introduction
How far does a developer's loss of control stretch once control is remitted to a syndicate of co-owners under article 1104 CCQ? How absolute is this syndicate's power following such transfer of control?
On October 27, 2022, the Court addressed these questions in Syndicat des copropriétaires de Gillette Lofts c. 9165-2115 Québec inc., 2022 QCCS 4000, as it rendered judgment in favour of Fasken's client via the application of the newly minted articles 1103 CCQ and 1103.1 CCQ. These articles provide that any co-owner (including the developer who still owns a unit) may apply to the Court and ask to annul or amend a decision of the co-owners if this decision is biased, taken with intent to injure the co-owners, in contempt of their rights or if an error was made in counting the votes. Likewise, a co-owner may seize the Court where systematic opposition of a group of co-owners prevents a vote to take place.
In this case, the Court saw no reason to intervene in the co-owners' decision, and dismissed the developer's claim.
In its judgment, the Court (1)reminds us that article 1103 CCQ enshrines the doctrine of abuse of rights in matters of divided co-ownership, (2) concludes that there was no such abusive conduct by the syndicate of co-owners in the case at bar and (3) adds that, not only was the mistrust of certain co-owners against the developer not "abusive," it was justified in light of the developer's lack of transparency in the conduct of its project. As for the question of systematic opposition, this was irrelevant to the case, as the conduct of the election was never obstructed.
Further, the Court held that the 90-day delay provided in the CCQ under article 1103 is a delay of forfeiture.
Takeaway
Following the loss of power provided at article 1104 CCQ, the developer becomes a co-owner like any other. In such circumstances, its expertise may be more of a hindrance than a blessing if further works are required. Indeed, as any owner, the developer will have to submit to (1) the declaration of co-ownership which constitutes a contract between all co-owners and (2) the will of the assembly of co-owners which is binding in this small-scale democracy.
Should any substantial works be required, that is, works that will need the approval of a double majority under article 1097 CCQ or a 90% majority under article 1098 CCQ, it is certainly best that they take place before the developer's loss of control over the syndicate.
Should such works require a subdivision of fractions, then it may be advisable for developers to create the intended fractions in the declaration of co-ownership even if such fractions will have a different interim use or will be physically joined. Indeed, while adding (or removing) fractions requires the vote of a double majority of co-owners to modify the declaration of co-ownership, work to physically join adjacent fractions (without combining them into a single fraction), or to modify the contiguous limits of two fractions does not (see article 1100 CCQ). In such case, the developer should ensure that the destination of those specific fractions permits both the interim and subsequent permanent use, to avoid the need to modify the declaration to allow the subsequent permanent use, which would trigger the requirement for a vote of the co-owners.
If neither of the foregoing is possible, then transparency and collaboration with the board of directors are key. In addition, a double majority may not be an easy feat. Preparation and proper execution of a plan to reach all co-owners and explain the project may thus be a wiser option than the threat of litigation and placing the co-owners before a fait accompli.
Summary of the Facts
9165-2115 Québec inc. ("9165") is the promoter and developer of the Gillette Lofts residential project, which consisted in converting an existing commercial building into a residential condo building. Following the conversion of the building in 2006-2007, 9165 remains the owner of unit 108. This unit was initially supposed to be divided into 3 residential units, but, in the end, remained a single commercial unit on the ground floor, which 9165 used as its office.
As of 2015, 9165 indicates to Gillette Lofts' board of directors (the "Board") that it intends to subdivide unit 108, and sell it as 3 distinct residential units (the "Project"), as originally intended. The Board sees no inconvenience in the proposed Project, but requests plans of the works to be completed, and emphasizes that the co-owners' approval will be required in the proportion provided by article 1097 CCQ. This proportion is a "double majority," that is 75% of the votes, as the works required will lead to an amendment of the declaration of co-ownership and new fractions will be added.
The Board advises 9165 that a double majority is a high threshold. However, 9165 seems confident that it can sway the co-owners in its favour, so much so that the work required is well under way by the time the vote is called for the first time.
On November 17, 2015, as well as January 26 and April 12, 2016, the assembly of co-owners is called to vote on the Project, but the outcome is unsuccessful for 9165. In effect, on the first such date, the quorum is not attained, while on the later two dates, the double majority is not attained.
Unsatisfied with the result, 9165 nonetheless completes its Project, thus forcing the Syndicate of co-owners to file proceedings requesting that the subdivision of lots be reversed. Indeed, interestingly, given that 9165 owns its private portion, it could proceed with its subdivision without the assembly's authorisation, despite being fully aware that the assembly's vote pursuant to article 1097 CCQ would eventually be required, at least after the fact, to add the newly created lots to the declaration of co-ownership. This was a risk that 9165 undertook willingly.
On November 4, 2020, the now-completed Project is once again presented to the co-owners by 9165, and, once again, 9165 is unsuccessful, as the required majority is not attained.
9165 thus contests the result of this vote via a cross-application pursuant to articles 1103 and 1103.1 CCQ pleading that the November 4, 2020, decision was biased, taken with the intent to injure 9165 and in contempt of its rights. The basis of 9165's argument is that this Project causes no prejudice to the co-owners.
The New Iteration of the Applicable Articles
As of January 2020, article 1103 CCQ benefitted from a substantial makeover whereby it no longer merely allows a Court to "annul" a decision of the assembly of co-owners, but further allows a Court to "amend" such decision, if such amendment is proven to be required:
1103. Any co-owner may apply to the court to annul or, exceptionally, to amend a decision of the general meeting if the decision is biased, if it was taken with intent to injure the co-owners or in contempt of their rights, or if an error was made in counting the votes.
The action is forfeited unless instituted within 90 days after the meeting.
If the action is futile or vexatious, the court may condemn the plaintiff to pay damages.
Meanwhile, article 1103.1 is a new disposition of law which provides that:
1103.1 Where the co-owners are prevented from acting as a majority or in the specified proportion owing to an impediment or the systematic opposition of some of them, the court may, on the application of a co-owner, make any order it sees fit in the circumstances.
Analysis
In its analysis, the Court concludes that 9165's contention whereby the co-owners' decision was biased or taken with the intent to harm is ill-founded.
Indeed, 9165 contended that the Board unjustifiably conflated 9165's lack of transparency in the course of its Project, with the approval required by the assembly of co-owners. According to 9165, its lack of transparency, if any, in the course of the Project concerned only certain plans or authorizations to be provided by the Board, while the approval of the assembly of co-owners under article 1097 CCQ was an unrelated issue.
The Court disagrees, and writes:
[183] En décidant de débuter et de poursuivre les travaux de subdivision en faisant fi des demandes légitimes du Conseil et en mettant ce dernier, de même que l'ensemble des copropriétaires devant des faits accomplis, 9165 a forcément créé un lien entre cette approbation et les travaux qui font désormais partie de l'immeuble.
The Court also addresses the means put forth by 9165 in its efforts to obtain the required majority. These efforts were poorly thought through, as the Court states:
[184] Qui plus est, en refusant de fournir des plans détaillés permettant au Conseil de rassurer les autres copropriétaires quant à l'impact concret de cette subdivision sur la copropriété dans son ensemble, 9165 a pu créer un sentiment de méfiance qui a motivé les copropriétaires à obtenir davantage de réponses avant d'accepter la modification proposée.
[185] Le Tribunal n'y voit rien d'abusif. Il n'y voit pas non plus une décision qui aurait été prise à l'encontre de l'intérêt collectif des copropriétaires, au contraire.
[186] 9165 ira même jusqu'à menacer les copropriétaires d'une poursuite en dommage advenant le cas où le vote ne serait pas en sa faveur, lors de l'assemblée du 12 avril 2016. À cette occasion, il tiendra également le Conseil à une obligation de résultat quant à l'issue du vote. Une telle conduite va clairement à l'encontre de l'exercice démocratique qu'est le vote de l'assemblée des copropriétaires.
[187] Si abus il y a eu, il ne venait ni du Conseil ni de l'assemblée des copropriétaires.
With respect to article 1103.1 CCQ, the Court distinguishes its application from that of article 1103 CCQ, thus enshrining two distinct legal regimes with two distinct objectives.
Indeed, the issue addressed by article 1103.1 CCQ is the impossibility to hold a vote, rather than the outcome of the vote:
[194] Quant aux pouvoirs conférés par l'article 1103.1 C.c.Q., la question est de savoir si nous sommes en présence d'un empêchement des copropriétaires d'agir selon la proportion prévue.
[195] Le recours prévu à l'article 1103.1 C.c.Q. ne vise pas l'attaque du résultat obtenu, mais bien l'empêchement à tenir un vote suivant la proportion prévue.
Finally, with respect to the 90-day delay to file an application against a decision taken by the assembly of co-owners, the Court reiterates what is already clearly stated in article 1103 CCQ, namely that this is a delay of forfeiture, and that no claim will be possible after this 90-day period has lapsed. For further clarity, anyone wishing to contest such a decision should bear in mind that a 90-day delay is not equivalent to a 3-month delay.
Although this delay is nuanced in other judgments (see Gaudette c. Syndicat de la copropriété Lauzon, 2022 QCCS 3848), we do not believe that these reasonings are irreconcilable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
