In the event of a loss, can the syndicate of co-owners (condominium association) sue the co-owner at fault?

This article is a modified version of a comment originally published by Éditions Yvon Blais in December 2019 (EYB2019REP2875). 

A formal notice is a debtor’s last chance to make reparation for his or her fault. A creditor’s failure to deliver formal notice to a debtor may have serious consequences, including the dismissal of a claim. 

In addition to the general principles governing the admissibility of a legal action, the co-ownership syndicate is required to fulfill certain specific obligations, such as the prior submission of a claim to the insurer, before commencing legal action against one of its co-owners. 

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In Syndicat des copropriétaires du condominium Verrières VI v. Maddalon1, the syndicate of co-owners had not given the defendants formal notice in a timely manner and no claim had been made against the insurer of the building. 

The syndicate was claiming compensation from the co-owners following a water leak in the bathroom of their unit that caused damage affecting several other units of Condominium Verrières VI. 

At the first hearing, the Superior Court found that the defendants’ knowledge of the damage did not relieve the syndicate of its duty to issue a formal notice and that the syndicate’s failure to do so had deprived the defendants of a full and complete defence. 

The Court also found that the syndicate should have asserted its rights against the building’s insurer. By failing to do so, it had deprived the defendants of the benefit of the waiver of subrogation clause contained in the insurance policy taken out by the syndicate. According to the judge, this clause represented an implied undertaking by the co-owners not to take legal action against one other. 

The Court of Appeal concluded that the syndicate had not met its burden of proof and it upheld the trial judge’s decision. 

Comment: This decision comes almost a year after the entry into force of the amendments to the provisions of the Civil Code of Québec2 relative to buildings held in divided co-ownership. The Court of Appeal did not consider the interpretation of the new provisions, as they were not in effect at the time. Nevertheless, this judgment illustrates that recent legislative changes constitute, to a large extent, a codification of pre-existing case law. 

Over the years, the courts have not been unanimous as to the ability of taking action against co-owners who have caused damage to the building in which they live. A first line of case law allowed the co-ownership syndicate or its insurer to take action against the co-owner at fault3. In other cases, it was found that the provisions of the declaration of co-ownership should be interpreted as precluding recourse against any co-owner4

This situation is now governed by the second paragraph of the new Section 1074.1 C.C.Q., which provides, among other things, that a syndicate that does not avail itself of insurance may not sue [a co-owner] for the damages for which it would otherwise have been indemnified by insurance.

Moreover, the costs incurred by the syndicate for the payment of the deductible and compensation for damage caused to property in which the syndicate has an insurable interest may only be recovered from the co-owner if the latter has committed a fault5.

The new provisions clarify the situation by avoiding the need for the courts to interpret the specific provisions of each declaration of co-ownership to determine whether recourse against co-owners is possible. One of the repercussions of the reform will certainly be to standardize case law on this issue.

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In his judgment, the trial judge criticized the syndicate for not having contested the insurer’s refusal to indemnify, which he considered abusive and cursory6. Following this reasoning, it is only after a final judgment confirming the absence of insurance coverage that the syndicate could have asserted its rights against Maddalon‑Molson.

We may question whether such steps are necessary when the insurer’s decision appears to be clearly reasonable and justified. It will be up to the courts to establish criteria to determine whether a syndicate has acted diligently in its claim against its insurer.

* The authors would like to thank law student Kevin Anglehart for his contribution.

1 2019 QCCA 1737, EYB 2019-321342.
2 Mainly the addition of Sections 1074.1, 1074.2 and 1075.1 C.C.Q., adopted on June 13, 2018 by the National Assembly as part of Bill 141 entitled An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions.
3 Vignoble (Condo) v. Gaudreau, 2019 QCCQ 7007, para. 31 (referring to Syndicat des copropriétaires des terrasses Lulli v. Fortin, REJB 2001-25554; Syndicat des copropriétaires de l’Estuaire condo, phase III v. Gentex, EYB 2005-122896; Assurances générales des caisses Desjardins inc. v. Labelle, EYB 2003-40825; Montanarini v. Syndicat Le Bourg-le-Ponsardin, EYB 2005-92131).
4 Compagnie d’assurances Missisquoi v. Aviva Canada Inc., 2018 QCCS 2760, EYB 2018-295918; Allianz Global Risks US Insurance Company v. Hemani, 2019 QCCQ 2656, EYB 2019-311729; GCAN Compagnie d’assurances v. Khalifeh, 2008 QCCQ 8518, EYB 2008-148608.
5 This principle is now codified in Section 1074.2 C.C.Q.
6 Syndicat des copropriétaires du condominium Verrières VI v. Maddalon, 2018 QCCS 2312, EYB 2018-294863, para. 82 and 93.

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