Co-owner Bankruptcy: Quebec Condo Fees

When a co-owner files for bankruptcy, the board of directors must act quickly to protect cash flow and fairness among the other co-owners. This article, current as of 2026-06-13, explains how to recover condo fees while complying with the Civil Code of Quebec.

To target the right searches and clarify the topic, let us state it plainly from the outset: Quebec co-owner bankruptcy and common expenses. We are discussing divided co-ownership (condo) and the recovery of common expenses, special assessments and contributions to the contingency fund.

• Key obligations: pay common expenses, assessments and contributions required under the declaration of co-ownership.
• Main concern: limit the impact on the annual budget and avoid using the contingency fund to cover an operating deficit.
• Strategy: combine administrative steps, the syndicate’s legal hypothec and close communication with the bankruptcy trustee.

What a co-owner’s bankruptcy means for the syndicate

Bankruptcy does not magically erase everything. In practice, two groups of debts must be distinguished:

• Before bankruptcy: overdue common expenses that are already payable become a claim to be filed in the bankruptcy. The syndicate must file a proof of claim with the bankruptcy trustee.
• After bankruptcy: expenses that continue to accrue (e.g., monthly fees) remain payable for the fraction. Depending on the situation, they must be paid by the occupant, the bankruptcy trustee, the hypothecary creditor or, ultimately, from the proceeds of a sale.

The bankrupt co-owner may lose control over the administration of their assets. However, the fraction continues to incur common expenses, and the obligations set out in the declaration of co-ownership remain attached to the unit. The board of directors must therefore secure its rights quickly to preserve the ranking and effectiveness of recovery efforts.

Legal framework in Quebec: declaration of co-ownership, Civil Code and legal hypothec

• Declaration of co-ownership: the declaration of co-ownership and the by-laws of the immovable specify the expenses, interest payable in the event of late payment, administrative fees and the demand letter procedure. Make sure the declaration of co-ownership is consistent with the Civil Code and applied uniformly.
• Civil Code of Quebec (section 1069): each co-owner is required to contribute to the expenses relating to the co-ownership, according to the relative value of their fraction. Reference: LégisQuébec – Civil Code of Quebec.
• Civil Code of Quebec (section 1071): the syndicate has a legal hypothec on a co-owner’s fraction to secure amounts owed for common expenses and payable assessments. Reference: LégisQuébec – Civil Code of Quebec.

In plain terms, the syndicate can register and enforce a legal hypothec in the land register if amounts remain unpaid. When properly managed, this security is the most effective tool for recovering at least part of the common expenses despite the bankruptcy.

Practical steps for the board of directors: before, during and after bankruptcy

The steps below apply to most divided co-ownerships. Adapt them to your declaration of co-ownership and obtain legal advice as needed.

Before bankruptcy (arrears building up)

1. Check the account and document everything: a detailed statement of common expenses, interest provided for in the declaration of co-ownership and any special assessment. Record the board of directors’ decisions in the minutes.
2. Demand letter: send a clear demand letter with a payment deadline and mention of the remedies available (legal hypothec, collection costs, etc.).
3. Registration of the syndicate’s legal hypothec: if the default continues, mandate a notary or lawyer to register the legal hypothec and, where applicable, serve the prior notice of the exercise of a hypothecary right. Speed matters to preserve your rights.
4. Rigorous follow-up: reminders, written payment arrangements approved by the board of directors and consistent application of the declaration of co-ownership (avoid preferential treatment).

During bankruptcy (filing and following up on the claim)

1. Proof of claim: file the pre-bankruptcy claim with the bankruptcy trustee (arrears, interest and costs authorized by the declaration of co-ownership). Attach the relevant statements and excerpts from the declaration of co-ownership.
2. Post-bankruptcy expenses: continue monthly billing. Monitor occupancy of the fraction (co-owner, tenant, trustee or hypothecary creditor) so that notices are properly sent.
3. Legal hypothec: if it was not registered beforehand, promptly assess registration and the next steps (exercising the rights). Bankruptcy does not necessarily prevent enforcement, but ranking and procedure remain decisive.
4. Communication: maintain formal communications with the bankruptcy trustee and, where necessary, the hypothecary creditor. Record everything in the file and in the board of directors’ minutes.

Afterward (sale, repossession, distribution)

1. Sale of the fraction: when a sale takes place under the supervision of the court, by the hypothecary creditor or by a voluntary buyer, require a statement of expenses and the required certificates. The buyer and notary will need an up-to-date statement.
2. Distribution of proceeds: the syndicate is paid according to the applicable priority rules and the ranking of its legal hypothec. Any unpaid balance may become a bad debt.
3. Closing the file: update the accounting records, archive the documents and present a summary to the board of directors and then to the annual general meeting to ensure transparency.

To structure these steps and integrate them into your internal controls, see our financial management service: Services – Financial Management.

The syndicate’s legal hypothec: scope, registration and ranking

The syndicate’s legal hypothec (Civil Code of Quebec, section 1071) secures amounts owed for common expenses and assessments. A few practical principles:

• Secured amounts: current condo fees, special assessments and amounts payable under the declaration of co-ownership; this generally includes interest and certain collection costs provided for in the declaration of co-ownership.
• Registration: registration in the land register makes the security enforceable against third parties and, where necessary, prepares the way for enforcement (prior notice, sale). Act quickly to avoid weakening your rights.
• Ranking and priorities: ranking depends on several factors (time of registration, other security interests and priority claims). Avoid risky assumptions; have a notary or lawyer confirm the situation. General reference: Civil Code of Quebec – LégisQuébec.

Governance tip: standardize a “collection” file template (statements, notices, proof of delivery, registration, communications with the bankruptcy trustee and the hypothecary creditor). This consistency reassures co-owners and reduces errors.

Budget, accounting and communication with co-owners

• Annual budget: do not fund an individual default by dipping into the contingency fund. It is used for major work and replacements in accordance with the maintenance logbook/contingency fund study.
• Cash flow: maintain some flexibility in the operating fund to temporarily absorb a default, then recover the amount promptly according to the procedure.
• Information: communicate discreetly as needed (without disclosing personal information). Present the annual general meeting with a statement of claims and steps underway. The board of directors’ minutes must demonstrate the rigour of the process.
• Documentation: keep the declaration of co-ownership, collection policies and notice templates up to date. Train management and the board of directors on the procedure and deadlines.

Useful resources:

• RGCQ – Collection and best practices in divided co-ownership
• OACIQ – Buying a divided co-ownership: key information
• LégisQuébec – Civil Code of Quebec (section 1069)
• LégisQuébec – Civil Code of Quebec (section 1071)

For more information, browse our blog and learn how a divided co-ownership under our management structured an effective collection plan after a series of non-payments.

FAQ – Bankruptcy and condo fees

• Does the bankruptcy trustee have to pay condo fees?
  It depends on the situation (occupancy, administration of the fraction and any agreement). Post-bankruptcy expenses continue to accrue; have responsibility for payment confirmed and keep the option of enforcing the legal hypothec open.
• Can services (heating, elevator) be cut off to apply pressure?
  No. Retaliatory measures must be avoided. Instead, apply the declaration of co-ownership (interest and fees) and legal remedies (legal hypothec, demand letter) for compliant recovery.
• Is there a specific deadline for registering the legal hypothec?
  Deadlines and formalities depend on the circumstances and the rules of the Civil Code of Quebec. Act without delay and consult a notary or lawyer to secure the ranking and procedure.

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

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