Among the various types of legal mortgage, one stands out. It is distinguished by its status among the various other mortgages. Indeed, considering the pseudo occult nature of the latter[1] as well as its superior rank for the added value brought by construction work[2], it is possible to conclude that the legislator accords it greater importance than the others[3]. One of the reasons for this is that construction contracts generally take the form of a contract of enterprise, with the contractor being paid once the work has been completed[4]. So it’s obviously preferable for contractors to have a certain status if we want to encourage them to carry out such work on buildings.
The birth of the legal construction mortgage
As previously mentioned, the legal construction mortgage enjoys a special status. In fact, it will come into being by the mere effect of the law, with no formalities whatsoever to be completed. Please note, however, that this does not mean no formalities ad vitam aeternam, but we’ll come back to that later.
Let’s look at the substantive conditions specifically related to the creation of a legal construction hypothec. These conditions are listed in article 2726 of the Civil Code of Québec :
2726. A legal hypothec in favor of persons who have participated in the construction or renovation of an immovable can only encumber that immovable. It is acquired only in favor of the architect, engineer, material supplier, workman, contractor or sub-contractor, by reason of the work requested by the owner of the building, or by reason of the materials or services they supplied or prepared for this work. It exists without needing to be published.
This means that 1) the creditor[5 ] must have participated in 2) construction or renovation work, or supplied materials useful for such work, 3) the work has been requested by the building owner, and 4) the work has added value to the building[6].
As soon as these criteria are met, the mortgage will come into being for a period of 30 days following the date of completion of the work, without having to be published[7]. However, it is essential for the hypothecary creditor to register the said hypothec before the expiry of the thirty (30) day period and to serve this notice of hypothec on the owner of the immovable in order to preserve the hypothec[8]. This publication will ensure that the mortgage remains valid for a period of 6 months from completion of the work[9]. In addition, it is important to remember that, for beneficiaries who have not entered into a direct contract with the owner of the building, the mortgage will cover the work from the moment when written notice of the contract is given to the owner.[10]
Once the 6-month period expires, the mortgage is automatically extinguished.[11] and any interested party may request that the said mortgage be cancelled.[12]. However, there are two ways of ensuring that the mortgage is retained beyond the 6-month period. The first is to publish an action against the owner of the building, and the second is to register a notice of exercise of a mortgage right. In both cases, the mortgage will remain in place until the procedures have been completed.
Samuel Grisé, lawyer
[1 ] Art. 2726 in fine and art. 2727, al.1 C.c.Q.
[2] Art. 2952 C.c.Q.
[3] Kauffman, SS 51 to 55
[4] Kauffman quoting Notary G Giroux, see NBP 36 and 37 of his book
[5] Remember that this creditor must be one of those expressly provided for in article 2726 C.c.Q.
[6] Art. 2728 C.c.Q.
[7] Art. 2727, para. 1 C.c.Q.
[8] Art. 2727, para. 2 C.c.Q.
[9] Art. 2727, para. 3 C.c.Q.
[10] Art. 2728 C.c.Q.
[11] Art. 2727, para. 3 C.c.Q.
[12] Art. 3061, para. 1 C.c.Q.
