Definition : Penal clause

Clause of the declaration of co-ownership (constituting act of co-ownershipwhich fixes in advance the monetary sanction (a fine) the syndicate may claim from a co-owner following the occurrence of a contravention of one of its provisions. However, the amount of the penalty may be reduced by the court if the clause is determined to be abusive. The penal clause may also hold the co-owner liable for extrajudicial fees incurred by the syndicate to enforce the declaration of co-ownership, to the extent that they are reasonable reasonable in all the circumstances. In particular, the Court must take into account that the payment of extrajudicial fees and disbursements, where permitted by such a clause, is intended to encourage a co-owner to comply with his obligations and, where he does not, to avoid a recurrence.

 WHAT YOU SHOULD  KNOW ! Bill 16 (art. 30) amended article 1053 of the Civil Code of Quebec by specifying that all penalty clauses applicable in the event of a contravention of the declaration of co-ownership are now part of the constituting act of co-ownership. In addition, any penalty clause included in a By-Laws of the immovable, before the coming into force of Bill 16 (January 10, 2020) is now deemed to be part of the constituting act of co-ownership (art. 150 of Bill 16)). Consequently, any decision to introduce or modify a penalty clause in a declaration of co-ownership must be made by the meeting of co-owners in accordance with article 1097 of the Civil Code of Quebec.

WARNING ! The sums that could be due under a penalty clause are not common expenses (condo fees). They cannot be legally transformed into common charges, despite the requirements of a declaration of co-ownership to this effect. These sums cannot be secured by a legal hypothec in favour of the syndicate of co-owners. Nor can a co-owner be sanctioned for his non-payment, by suspending his voting rights and disqualification from being a director. Finally, the buyer of a fraction cannot be required to pay such sums due by his seller, because of article 1069 of the Civil Code of Quebec.

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