The legal hypothec

Although the concept is familiar to everyone, the functioning and subtleties of legal hypothecs in favor of people who participated in the construction or renovation of a building remain mostly a mystery for entrepreneurs and sub-contractors. Let's go over the basic principles together.

When drafting the Civil Code of Quebec, the legislator chose to give priority to certain claims and provided that only these could give rise to a legal hypothec. In these claims, we find in particular the claims of persons who participated in the construction or renovation of a building.¹.

Why exactly? Because unlike garage owners who can hold back property on which they have made repairs until they are paid for, the contractor or subcontractor who is doing work on a third party's real estate cannot keep the property until payment is made. However, considering that the work of the contractor or subcontractor brings added value to the building, the logic being that the property should increase in value with the work carried out, the legislator has made the choice to allow contractors and sub-contractors to encumber the immovable property on which work was carried out with a legal mortgage in favor of persons who participated in the construction or renovation of a building, in order to protect their debt.

Thus, by registering a legal hypothec, even if the building changes ownership, the debt will remain attached to it, allowing the contractor or subcontractor to do what is necessary to recover it. This allows contractors and sub-contractors to avoid carrying out work on a property which will thus increase in value without ever being paid for the work.

However, it should be noted that it is not necessarily the full value of the work that can be guaranteed by the publication of a mortgage, since this guarantees the added value given to the building by the work, materials or services provided or prepared for this work.².

Do not publish a mortgage who wants either, since this security is reserved for those who have contracted directly with the owner of the building or who have reported their work in writing to him before it was carried out. The contractor and the subcontractor whose services are retained will therefore have every interest in validating the identity of the owner of the building before starting their work and, if necessary, denounce the existence of their contract.

As for deadlines, although the Civil Code of Quebec indicates that the mortgage exists without the need to publish it³, and if it survives, although it has not been published, for 30 days following the completion of the work (read the end of all works), an entry must be published before the expiration of this 30-day period in order for the mortgage to be retained. Also, even once retained by the publication of a registration, the mortgage expires six months after the end of the work unless, in order to maintain the mortgage, the creditor publishes an action against the owner of the building or registers a notice of exercise of a hypothecary right.

In conclusion, given the importance of this security for the contractor or subcontractor since it is sometimes the only lever that he can use to be paid, considering that each case is a specific case, the contractor or subcontractor has every interest in consulting his legal advisers to know his legal advisers to know his rights and remedies in case of non-payment, but ideally also before starting the work in order to cancel his contract if necessary and thus avoid unpleasant surprises.

1 Article 2724 C.C.Q.
2 Article 2728 C.C.Q.
3 Article 2726 C.C.Q.

Consult the source publication