The housing complex and its impact on real estate transactions

The Act respecting the Administrative Housing Tribunal (the “Act“) provides that the sale of an immovable that is part of a housing complex is prohibited unless prior approval is obtained from the Administrative Housing Tribunal (the “Tribunal“)[1].

Any owner of residential rental properties should therefore ask themselves whether their properties are part of a housing complex.

The Act provides that in order to be in the presence of a housing complex, the following cumulative conditions must be met:

  • several immovables situated near one another;
  • the immovables together comprise more than twelve dwellings;
  • the immovables are administered jointly by the same person or by related persons; and
  • some of the immovables share a common accessory, dependency or, except for a common wall, a portion of the structure.

The condition that generally elicits greater analysis by the Tribunal is that of the accessories and dependencies that the buildings in question have in common. Without constituting an exhaustive list, and subject to the study of each case, parking lots, a swimming pool, a gymnasium, a shed, a laundry room and a heating system common to several buildings may constitute dependencies or accessories common to immovables part of a housing complex (insofar as the other conditions mentioned above are also met).

Since the purpose of these specific provisions of the Act is to avoid a loss of services or benefits common to the tenants conferred by their lease or because of the particular layout of the building in which they live, the alienation of an immovable forming part of a housing complex will have to be the subject of an application for authorization before the Tribunal, which may only be presented by the owner of the immovable in question or by a promisor-purchaser.

It should be noted that the Act provides for certain situations where the sale of an immovable that is part of a housing complex is exempted from the requirement to obtain prior authorization from the Tribunal, in particular where all the immovables that make up the housing complex are sold to one person under a single contract. The rights of the tenants are not disadvantaged in such a case.

In authorizing the sale of the immovable, the Tribunal may attach certain conditions, ranging from the granting of a right of first refusal in favour of the tenant for any subsequent sale or the prohibition of repossession of the dwelling for a period of five years, to the establishment of an easement of passage[2], the objective again being to protect the rights and benefits of the tenants and to avoid disputes or litigation arising out of the transaction.

The sale of an immovable part of a housing complex concluded without the prior authorization of the Tribunal may be declared null. A line of court decisions holds that this nullity is said to be relative, as it is established for a public order of protection, and that only a tenant has the required interest to present such a recourse before the courts[3].

The concept of housing complex is therefore of paramount importance, in that it limits the contractual freedom of the parties involved in a transaction for a residential rental immovable, so that the rights of tenants who may be affected by such a transaction are preserved. An in-depth legal analysis of each case is therefore required.

By Mathieu Tremblay

[1] Articles 45 to 50 of the Act.

[2] Labelle 1996.

[3] Rosenthal v. 143954 Canada Inc. (1997 – C.A.)