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Transition between the property developer and the new Board of Directors

Transition between the property developer and the new Board of Directors

According to article 1104 of the Civil code of Quebec, the Board of Directors must call a special meeting of the co-owners for the election of a new Board of Directors within ninety days from the date at which the promoter of a co-ownership no longer holds the majority of the votes of the general meeting of the co-owners. In practice, it is the promoter who calls this special meeting as the sole director of the syndicate of co-ownership.

 If the special meeting is not called within ninety days, any co-owner may do so.

 According to article 1105 of the Civil code of Quebec, at the time of this special meeting, the promoter, as the outgoing sole director, renders an account of his administration of co-ownership since its creation. He must produce financial statements accompanied by the comments of an accountant on the financial situation of the syndicate. In his report to the co-owners, the accountant must indicate any irregularity found.

 According to this same article, the financial statements must be audited at the request of the co-owners representing a minimum of 40% of the votes of all the co-owners. This request can be made at any time, even before the special meeting. According to article 1106 of the Civil code of Quebec, the accountant has a right of access at all times to thebooks, accounts and vouchers concerning the co-ownership. The accountant may require the promoter or a director to provide him any information and explanations which he considers necessary for carrying out his functions.

 

At the special meeting an election must take place to elect from among the co- owners, the number of administrators required by the declaration of co-ownership to make up the Board of Directors of the syndicate for the coming year.

 The points to be verified by the new Board of Directors

From the time they take office, that the members of the Board of Directors should analyze the co-ownership's operating budget. This is an important step because it is important to determine if there is a need to increase the budget for common expenses to reflect the real needs of the co-ownership, which  may differ from those foreseen by the promoter.

It is essential to understand that the promoter is obligated to contribute to the common costs of the co-ownership according to the relative value of all the fractions he owns. The promoter has status of co-owner until he sells all the fractions of the co-ownership. Therefore, it is very important to carefully    examine the financial statements in order to ensure that the promoter has fulfilled obligations as a co-owner, and that he continues to do so until the last fraction is sold.

 According to article 1108 of the Civil code of Quebec, the new Board of Directors may, within sixty days of its election, cancel without penalty, contract signed by the syndicate before the election of the new directors, for the maintenance of the building or for other services, when the term of the contract exceeds one year.

 This power allows the Board of Directors to cancel a service contract lasting more than one year, that is disadvantageous for syndicate due to its being priced above market average, as well as when it has been signed between the promoter and someone closely related to him, or a company controlled by the promoter.

About the author

Me Kevin J. Lebeau, avocat

Diplômé de l'Université McGill (B.A.) et l'Université de Montréal (LL.B.), Me Lebeau est membre du Barreau du Québec depuis 2000.

Depuis 2001, il a exercé en droit immobilier avec concentration en droit de la copropriété dans plusieurs contextes, dont en milieu d'association, en société et en contentieux d'entreprise au sein d'une firme de gestion se spécialisant dans la gestion des copropriétés divise, Gestion Immobilière Ges-Mar Inc. Me Lebeau est également conseiller juridique aux membres d'Avantages Condo.

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