Rent-to-Own in Quebec: Location avec Option d'Achat

In Quebec, rent-to-own (location avec option d’achat) is built from two Civil Code institutions rather than common-law contracts: a lease of a dwelling, and a promise of sale. Both come with rules that don’t exist in the other provinces. The tenant’s right to stay in the home, the power of the Tribunal administratif du logement (TAL) to fix rent, and the presumption that money paid on a promise of sale counts toward the price all change how a deal is written. The basic structure (an option fee, rent credits and a price fixed at signing) and the general contract checklist are explained in how rent-to-own works in Canada. This page covers the Quebec rules, and the alternative mortgages hub lists other routes for buyers outside the standard bank mortgage.

The option: a promise of sale under the Civil Code

The option is a promise of sale by the owner. Several articles of the Civil Code of Québec shape what it is worth:

• Taking up the option binds both sides. Under article 1396, once the beneficiary of a promise “accepts the promise or takes up his option, both he and the promisor are bound to enter into the contract.”
• Money paid counts toward the price unless the contract says otherwise. Article 1711: “Any amount paid on the occasion of a promise of sale is presumed to be a partial payment on account of the price unless otherwise stipulated in the contract.” An option fee that the owner means to keep whatever happens has to be described that way in writing.
• A refusal to sell can be overcome in court. If the owner won’t sign the deed, article 1712 lets the beneficiary obtain a judgment in lieu of title.
• A sale to someone else stands. Article 1397 says a contract made in violation of a promise can be set up against the beneficiary, leaving them a claim for damages against the owner (and against a buyer who acted in bad faith) rather than the home itself. This is the main risk in a Quebec deal.
• Possession under a promise can amount to a sale. Article 1710 says a promise of sale “with delivery and actual possession is equivalent to sale”. A tenant-buyer living in the home holds it as a tenant, which is one reason a notary keeps the lease and the promise in separate documents with clearly separate payments.

The lease and the TAL

The lease is a lease of a dwelling, with the protections that come with it:

• The right to stay. Article 1936 gives every lessee “a personal right to maintain occupancy”, and the lease can be renewed under the usual rules even after the option period ends without a purchase. Article 1937 says a sale of the building doesn’t let the new owner end the lease.
• Rent can be reviewed. At signing, the landlord must tell a new tenant the lowest rent paid in the previous 12 months (article 1896). A new tenant paying more than that can ask the TAL to fix the rent within 10 days of signing the lease (article 1950). An above-market rent that funds rent credits is exposed to that review unless the contract separates the market rent from the option payment.
• Language. Article 1897 requires the lease to be drawn up in French unless the parties expressly wish to use another language.

The notary

Quebec property sales close before a notary. Under article 2693 of the Civil Code of Québec, an immovable hypothec (a mortgage on real estate) must be granted by notarial act en minute, a deed a notary draws up and keeps, or it is absolutely null. A notary can also draft the promise of sale at the start, which settles the questions above (how the option fee is treated, how payments are split between rent and option, and what happens if the owner sells) before any money changes hands. The notary also examines the title and the owner’s existing hypothec, since a default on that hypothec puts the home and the tenant-buyer’s credits at risk. A current certificate of location and a building inspection round out the checks.

The welcome tax at purchase

When the option is exercised, the buyer pays Quebec’s transfer duties, the welcome tax, on the sale, with higher brackets in Montreal; the Quebec welcome tax calculator has the brackets.

French terms

Ontario reaches a similar result through tenancy statutes and common-law contracts instead of a civil code: rent-to-own in Ontario explains how that works.