Acquisition of a property by multiple owners : The importance of an indivision agreement

Are you considering acquiring an income property in partnership? It is highly recommended that you consult your notary or lawyer to draft an indivision agreement. This document can help prevent numerous disputes.

Let’s take a concrete example: you and a friend decide to invest in a triplex. Since you are contributing a larger financial share, you and your friend agree that you will own two-thirds of the property, while your friend will own one-third. However, the law sets out basic obligations for undivided co-owners, notably that each co-owner’s rights to the property are exercised in proportion to their share in the building. Therefore, in the absence of an indivision agreement stating otherwise, ownership shares are presumed to be equal, meaning each of you would be considered a 50 percent owner. Consequently, your friend could be required to pay half of the expenses related to the property. Conversely, they could also be entitled to receive half of the rental income and, upon the sale of the property, half of the net sale proceeds, rather than the one-third share originally intended.

An indivision agreement not only establishes ownership shares but also defines each co-owner’s responsibilities and benefits. Your notary or lawyer can include provisions outlining procedures in case one co-owner wishes to sell their shares, helping to prevent disputes and maintain a good relationship between co-owners.

A right of first refusal could be included, ensuring that a co-owner wishing to sell their share in the property offers it first to the other co-owner(s) before selling to an external party.

Additionally, the agreement can establish rules regarding expense sharing, property management, and even the distribution of sale proceeds if the co-ownership is terminated.

To avoid potential conflicts and properly structure the management of an undivided property, it is essential that you consult your notary or lawyer to take full advantage of an indivision agreement.

This article was written in collaboration with Mtre Marie-Pier Drolet, notary at Blanchard Lupien Notaries LLP.