RESIDENTIAL LEASES: THE PRIMACY OF THE DECLARATION OF CO-OWNERSHIP

On June 28, in the case Syndicat des copropriétaires de Sir George Simpson, the Québec Court of Appeal issued a decision to the effect that the declaration of co-ownership of an immovable had precedence over the granted leases infringing it.

The facts that gave rise to this dispute were relatively simple. The declaration of co-ownership and the by-laws of the immovable of the Syndicat des copropriétaires de Sir George Simpson (the “Syndicate”) contain provisions prohibiting the rental of co-ownership units for periods of less than one year. In May 2016, the Syndicate was informed that a couple of co-owners (the “Co-owners-landlords”) were going to “lend” their co-ownership unit for a three month period. Suspecting the existence of a lease, the Syndicate sent the Co-owners-landlords and potential occupants a letter of formal notice advising of the specific article of the by-laws of the immovable and the declaration of co-ownership which prohibit renting for less than one year.

In response to this letter, the Co-owners-landlords acknowledged the existence of a three month lease, which was signed in May 2016 with Day6 Films Productions Inc. (the “Tenant”), for the accommodation of an American actress and her team. The Co-owners-landlords then informed the Syndicate that a new one-year lease would be signed with the Tenant in June 2016 to replace the one signed in May 2016. However, this new lease would be subject to certain conditions allowing its termination before the end of the one year term.

As a result, the Syndicate sought an injunction from the Court to have the lease between the Co-owner-landlords and the Tenant declared void, and to have the occupants from the leased premises evicted.

In the first instance, the Superior Court refused to grant the requested injunction. For the Court, although the lease in question infringed the prohibition provided for in the by-laws of the immovable and the declaration of co-ownership, it could not be set up against the Tenant. Indeed, there was no evidence that the Tenant was aware of the prohibition when it signed the first lease in May 2016.

Following this judgment, the Tenant availed itself of the conditions set out in the new lease in order to terminate it as early as August 2016, well before the end of the one year term.

On appeal of this judgment, the Court of Appeal noted that there was no doubt that the Co-owners-landlords and the Tenant were aware of the prohibition to rent the unit for a period of less than one year when they signed the new lease in June 2016. The prohibition had become enforceable by the letter of formal notice. For the Court of Appeal, the purpose sought by the Co-owners-landlords and the Tenant by signing the new lease was to indirectly accomplish what they could not directly accomplish with the first lease, that is, to rent the unit for a period of less than one year. For these reasons, the Court of Appeal stated that the real lease between the parties signed in May 2016 for a period of three months was contrary to the by-laws of the immovable and that the injunction sought in the first instance, requesting that the lease be declared void and that the Tenant be evicted, should have been granted.

This decision of the Court of Appeal reminds us of the importance of respecting the declaration of co-ownership and the by-laws of the immovable when it provides for the duration of leases that can be granted by co-owners. When a co-owner and a tenant scheme to skirt the rules that are provided in the declaration of co-ownership and the by-laws of the immovable, as in this case, they may be responsible to the syndicate of co-ownership and may be required to indemnify it.

By Mathieu Tremblay