Judicial Sale Under Court Supervision: Quebec Co-ownership

When a co-owner accumulates unpaid condo fees, the board of directors (board) must protect the syndicate’s cash flow and the fairness owed to the other co-owners. As a last resort, a sale under court supervision may make it possible to recover the assessments. This practical guide explains, in the context of divided co-ownership in Quebec, when to consider this remedy, how to proceed and what to expect.

You will find:

• The legal basics applicable to co-ownership.
• The prerequisites and alternatives to try.
• The steps for the board, from the prior notice of the exercise of a hypothecary right to the sale.
• The effects on occupants and the distribution of the sale proceeds.

For additional resources on managing arrears and operations, see our service pages on financial management and administrative management, as well as our blog for related articles.

What is a sale under court supervision in co-ownership?

A sale under court supervision is a method of exercising a hypothecary right provided for under the Civil Code of Quebec (C.C.Q.). In a case involving unpaid common expenses, the syndicate may publish a legal hypothec to secure the claim and then ask the court for the immovable (the defaulting co-owner’s fraction) to be sold under judicial supervision.

In practical terms, the court authorizes and oversees the sale, sets the essential terms (advertising, upset price and conditions) and supervises the distribution of the proceeds. This mechanism seeks to strike a balance: satisfying creditors according to their rank while reducing the risk of irregularities. The relevant provisions are found in particular in the C.C.Q. (hypothecs and the exercise of remedies) and the Code of Civil Procedure for procedural matters.

Useful references:

• Civil Code of Quebec (hypothecs and remedies): LégisQuébec — CCQ-1991.
• Code of Civil Procedure: rules governing judicial sales.

When to consider it: arrears, legal hypothec and other breaches

Before reaching this point, the board must exhaust reasonable collection measures and act in accordance with the declaration of co-ownership (DCV) and the by-laws of the immovable.

• Formal demand: a formal notice specifying the amounts owed (principal, interest and penalties, if provided for in the DCV) and a deadline for payment.
• Payment agreement: a clear payment schedule approved by board resolution and recorded in the minutes.
• Additional measures: suspension of certain non-essential privileges provided for in the DCV (e.g., access to amenities), always in compliance with fundamental rights and rights relating to the common portions.

If the arrears continue, the syndicate may use the syndicate’s legal hypothec provided for in the C.C.Q. This hypothec secures the common expenses owed by a co-owner for the co-owner’s fraction. After publication in the land register and service of the prior notice of the exercise of a hypothecary right, the syndicate may, depending on the circumstances, ask for a sale under court supervision. The order of priority and certain specific protections are determined by the Civil Code; several claims, including certain claims of municipalities and prior hypothecs, may have priority according to their rank.

Note: other serious breaches of the DCV (e.g., repeated nuisances or interference with the common portions) do not, in themselves, justify a sale under court supervision. This remedy is connected to the exercise of a hypothecary right; other breaches call for different remedies (injunctions, penalties provided for in the DCV, etc.).

To structure your arrears follow-ups and notices to co-owners, see our financial management and operations management services.

Key steps for the board: from prior notice to sale

The process varies depending on the file and the court’s directions. Here is the framework generally followed for a co-ownership.

1) Preparation: file, resolution and evidence

• Detailed statement of account: common expenses, interest, penalties provided for in the DCV and reasonable collection costs.
• Documentation: copies of the DCV, by-laws, assessment calls, reminders, formal demands and relevant minutes.
• Board resolution: authorizing the registration of the syndicate’s legal hypothec, service of the prior notice of the exercise of a hypothecary right and the retainer of a lawyer. Record the resolution in the minutes.

2) Legal hypothec and prior notice of the exercise of a hypothecary right

• Publication: registration of the legal hypothec in the land register against the applicable fraction, for the amount owing (and any permitted additions).
• Prior notice of the exercise of a hypothecary right: served on the defaulting co-owner and published, it specifies the remedy contemplated (in this case, a sale under court supervision) and grants a period to remedy the default, as required by the C.C.Q.
• Timelines: comply with the minimum periods provided for in the Civil Code between the notice and the exercise of the remedy. In practice, the file progresses at the pace of the judicial process.

3) Application to the court and sale measures

• Filing the application: the syndicate’s lawyer asks for authorization to sell under court supervision and proposes terms (type of sale, advertising, upset price, viewing and occupancy conditions).
• Court order: it sets the framework for the sale (postings, advertisements, platform, auction or sealed bids, deadlines, buyer’s deposit, officiating notary, etc.).
• Advertising and viewings: follow the directions in the order. The board must facilitate reasonable access to the fraction for viewings, coordinating with the occupant and protecting the safety of the common portions.

4) Adjudication, deed and remittance of funds

• Acceptance of an offer/bid: depending on the order, acceptance may require the approval of the court or the designated professional (bailiff, notary or appointed broker). The buyer purchases without warranties other than those stipulated in the order.
• Deed of sale: received by the notary indicated; published in the land register; the net proceeds are remitted in trust for distribution.
• Discharge and follow-up: discharge of the registrations covered by the order; delivery of the keys and taking possession by the buyer, while respecting tenants’ rights where applicable.

Effects on the co-owner, tenant and syndicate

• Defaulting co-owner: the sale may extinguish certain debts up to the amount of the price obtained. If there is a shortfall after distribution, a balance may remain personally owing, depending on the circumstances and the judgments.
• Tenant in place: a lease may survive the sale depending on its rank, priority in time and the order. Check the applicable rules before taking any eviction steps.
• Syndicate: during the process, common expenses continue to accrue. The board must charge them to the co-owner’s account for as long as the co-owner remains the owner, and then to the buyer from the date of transfer, in accordance with the DCV and usual practices. Adjust the accounting and inform the condominium manager and notary of the most recent annual general meeting, the budget and any special assessments, if applicable.

Regarding confidentiality, keep communications targeted and factual. Avoid publicly identifying the defaulting co-owner at the annual general meeting; limit discussion to the overall financial impacts and the status of collection, in compliance with privacy requirements.

Distribution of the sale proceeds and creditor priority: what to expect

The sale price is distributed according to the rank of the claims and the order. Without listing every situation, the typical order includes:

1. Court, sale and professional fees authorized by the court.
2. Certain tax and municipal claims benefiting from priority under the law.
3. Conventional hypothecs and other published rights, according to their rank.
4. The syndicate’s legal hypothec for secured common expenses, to the extent and with the priorities provided for in the C.C.Q.
5. Any remaining balance to the defaulting co-owner.

Two points requiring the board’s attention:

• Interest and penalties: claim only what is clearly provided for in the DCV or by law; document your calculations and due dates.
• Reasonable costs: keep supporting documents (bailiff, publication and professional fees). The court assesses their reasonableness and may adjust them.

For an overview of best practices in co-ownership and the syndicate’s role, the RGCQ publishes useful resources. For up-to-date legal provisions, refer to the Civil Code of Quebec and the Code of Civil Procedure. For the impacts on a transaction and the disclosure of information, also see the OACIQ.

Practical advice for your board

• Document everything: keep proof of delivery, account statements and minutes. A complete record accelerates the process and reduces disputes.
• Act quickly but gradually: the longer the arrears continue, the greater the gap becomes between the arrears and the potential sale price.
• Remain professional in your communications: offer to meet with the defaulting co-owner, keep the tone factual and offer a realistic payment schedule before escalating.
• Prepare the building: schedule viewings while limiting the impact on the common portions; remind everyone of access and safety rules.
• Anticipate cash-flow needs: adjust the budget, inform the annual general meeting of the collection status and, if necessary, authorize a temporary special assessment to protect the contingency fund and routine maintenance (with the maintenance logbook / contingency fund study as supporting documentation).

Frequently asked questions

• Does a sale under court supervision cancel all of the co-owner’s debts? Not necessarily. Depending on the price obtained, the rank of the claims and the judgments, a balance may remain.
• Can the syndicate choose the buyer? No. The selection process is set out in the order (auction or bids), and the transaction proceeds according to those rules.
• What should be done with movable property left in the fraction? Follow the order and the applicable rules. Avoid self-help measures (e.g., emptying the unit) without a clear legal basis and directions from the officer responsible for the sale.

This article provides general information and does not constitute legal advice. Consult a lawyer or notary regarding your situation.

Do you manage a co-ownership in Quebec? Explore our packages or contact us to assess your needs.