What If My Co-owner Wants to Rent Out His Flat?

One of the most popular posts on my blog is the one dealing with the differences between Properties Held in Divided Ownership Versus Undivided Co-Ownership

Here's the latest question. I thought it deserved its own entry. 

Hello,

I own the lower portion of an undivided co-property. The owner of the upper is moving and has has been trying to sell his section. Since he has not had any offers he is now considering renting. According to our co-prop agreement he requires permission from the institution with which he has a mortgage and from me. I do not feel comfortable having someone who is a tenant rather than an owner living above me. Therefore I do not want to give him permission. According to him he says that he does have the right to rent out his apartment regardless of any reason I give. Is this true? Can he challenge this if I don't want to give him authorization?

Thank you for any help

Hello Anonymous,

There are two issues. First, if the agreements says you must consent, then that should be the end of the story. I would hope that your neighbor would  drop the matter there.

The second issue has nothing to do with you but is equally germane and potentially waaaay more scary for your upstairs neighbor. What does the mortgage lender say? Generally speaking, lenders (and in Quebec that means either National Bank or Caisse Desjardins) do not allow owners of undivided co-owernship properties to rent their places out because there is no automatic right for a financial institution to repossess the unit, ie to get a tenant out. That makes it harder for them to sell if a borrower defaults on a mortgage.

You have the same mortgage lender, presumably. What does your mortgage say? If there is a prohibition against renting, it will be there in black and white. If your upstairs neighbor violates the terms of his mortgage the bank could, in theory, call the mortgage loan.

I would be surprised if he has the right to rent.I would be surprised if he would want to go up against his bank. That doesn't generally go well.

Hope this is helpful.