Model houses or units in inventory: what you need to know

Several months ago, in order to develop an area where several pieces of land belonged to you, you built a house without a buyer in sight for it. This house allowed you to present your know-how while clearly identifying the sector as being in development. The operation proved to be a success and all the houses in the neighborhood are now sold. There is even a customer interested in acquiring the model house. Will this model house be covered by the guarantee plan for new residential buildings?

Under the Regulation on the guarantee plan for new residential buildings, the administrator guarantees the execution of the legal and contractual obligations of an entrepreneur referred to in Regulation and resulting from a contract concluded with a beneficiary for the sale or construction of a new taxable residential building. But the question arises: what do we mean by “nine”? Is a model unit or stocktaking (completed but not sold, for example, a private portion that has not yet found a buyer in a condominium building) is “new” within the meaning of Regulation ? The answer is not as simple as we might think.

With respect to buildings not owned in divided co-ownership¹, the Regulation states that” The guarantee of a plan is applicable to a building that does not have a beneficiary at the end of the work provided that the reception² of the building takes place within 24 months following the end of the work. ” To use the example in the introduction, a model house received within 24 months of the end of its work will benefit from warranty coverage. That received 25 months after the end of the work will not benefit.

With respect to buildings held in divided co-ownership³, the Regulation Indicates that” The guarantee of a plan applies to a private portion that does not have a beneficiary at the end of the work on the common portions provided that the private portion is received within 24 months following this end of the work. ” This means that a unit received within 24 months following the end of the work on the common areas will benefit from warranty coverage. That received 25 months after the end of the work will not benefit.

In short, in all cases, it is from the date of the end of the work that the deadline is calculated, and that to qualify the building as “new” and eligible for warranty coverage, the reception must be done within 24 months following this date.

Obviously, if the unit is received less than 24 months following the date of completion of the work, it will be covered by the warranty plan. On the other hand, the guarantee relating to defects in design, construction or construction and to defects in the ground within the meaning of article 2118 of the Civil Code will however be limited to the term that remains to run from the warranty. For example, a house received 12 months after the end of the work will therefore be covered against construction defects for the next 48 months, and not for 60 months.

Also, since the delay is calculated according to the date of the end of the work and the date of reception, nothing in the Regulations prevents the building from being covered by the guarantee plan if it was used or rented before the reception. Consequently, both rented units and model units can be covered by the warranty plan provided they are received within 24 months following the end of the work.

Knowing the impact of the end of the work date, namely that the building may be sold without warranty coverage after the expiration of a certain period of time or that the guarantee offered will be less than that originally planned, the contractor has every interest in advising the administrator of the various end of work dates by giving him a notice to that effect and thus put the building into inventory. Where applicable, he must also give this notice of completion of work to the beneficiary so that the latter can be informed of the term of his guarantee, all in order to avoid that the guarantee plan applies to a building that should no longer be covered or that the guarantee is offered longer than it should be.

DID YOU KNOW THAT?

The administrator must send to the Régie without delay any information likely to call into question the issuance or maintenance in force of a contractor's license. In particular, the administrator must inform the Régie without delay of any case of an entrepreneur who refuses to comply with a decision of the administrator or an arbitration decision.

¹See article 15 of Regulation on the guarantee plan for new residential buildings.

²In the application of the Regulation respecting the guarantee plan for new residential buildings, “reception of the building” means the act by which the beneficiary declares to accept the building which is in a condition to be used for its intended use and which indicates, where appropriate, the work to be completed or corrected. This reception is done by signing a form, generally at the same time as the transfer of title to the property.

³See article 31 of Regulation on the guarantee plan for new residential buildings.

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