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Whileregistration of the legal hypothec of persons who have participated in the construction or renovation of an immovable (hereinafter ” legal construction hypothec “) is necessary to preserve this privilege, formal notice is required to advise the debtor that he is in default.
Indeed, legal doctrine requires that a formal notice be sent in advance to the owner who is in default, unless he is in default by operation of law or the terms of the contract provide for an express stipulation concerning default.
The definition of a debtor in default by operation of law is set out inarticle 1597 of the Civil Code of Québec:
1597. The debtor is in default ipso jure, by operation of law alone, when the obligation could only be usefully performed within a certain period of time, which he has allowed to elapse, or when he has failed to perform it immediately despite the urgency of the situation.
He is also in default by operation of law when he has failed to perform an obligation not to do, or when he has, through his fault, made it impossible to perform the obligation in kind; he is also in default when he has clearly manifested to the creditor his intention not to perform the obligation or, in the case of an obligation to be performed successively, when he repeatedly refuses or neglects to perform it.
Source: Civil Code of Québec, RLRQ c CCQ-1991, art 1597
In practice, and even more so in the construction industry, cases of default generally arise from circumstances not previously specified in a contract, so that formal notice is practically and systematically necessary.
In Quebec law, a mise en demeure is a written notice sent to a debtor who is in default of his contractual obligations, in the form of a written request made outside the judicial process:
1594. The debtor can be put on notice to perform the obligation by the very terms of the contract, when it is stipulated that the mere passage of time for performance will have this effect.
He may also be placed in default by an extrajudicial request from his creditor to perform the obligation, by a legal action brought against him or, again, by operation of law alone.
1595. The extrajudicial request by which the creditor puts the debtor in default must be made in writing.
It must allow the debtor sufficient time to perform, having regard to the nature of the obligation and the circumstances; otherwise, the debtor can always perform within a reasonable time of the request.
Source: Civil Code of Quebec, RLRQ c CCQ-1991, art 1594 and 1595
In concrete terms, it is the debtor’s failure to meet his obligations that leads to the obligation to issue a formal notice.
More specifically, the purpose of this letter is to warn the defaulting debtor and encourage him to meet his obligations within a fixed, reasonable timeframe. This letter is a useful step in dispute resolution, as it warns the debtor that if he fails to meet his commitments, legal proceedings, or even mortgage proceedings, will be taken against him without further notice or delay.
In the case of a construction legal hypothec, the person who participated in the construction or renovation has the burden of issuing a formal notice to the owner.
There are no other specific legal requirements to this effect.
The demand letter is usually sent when the debtor is in default, or in other words, when the person who has been involved in the construction or renovation is unpaid when due.
It must also be sent before or at the same time as the notice of mortgage recourse.
It’s important to know that a letter of formal notice is required in contractual matters, and is therefore practically mandatory in the context of a construction contract. It is therefore essential that the creditor (here the ” beneficiary ” or ” person who has participated in the construction or renovation of the building “) goes through this stage.
Even if the law does not specify a deadline, it is to the beneficiary’s advantage to issue the letter of formal notice without delay, since the date of receipt of the letter will generally coincide with the date of commencement of legal or contractual interest.
Therefore, as soon as the beneficiary becomes aware of the owner’s default, it should send a letter of formal notice to the debtor without delay.
In the case of a legal construction hypothec,Article 1595 of the Civil Code of Québec governs formal notice:
1595. The extrajudicial request by which the creditor puts the debtor in default must be made in writing.
It must allow the debtor sufficient time to perform, having regard to the nature of the obligation and the circumstances; otherwise, the debtor can always perform within a reasonable time of the request.
Source: Civil Code of Québec, RLRQ c CCQ-1991, art 1595
The beneficiary must write a letter to the owner. In this letter, he must mention the defect and give a reasonable deadline for the owner to meet his obligations and rectify the situation. Failing to give the owner time to rectify the defect would not meet the objectives of the formal notice.
Respecting the principle of good faith, the beneficiary must make sure to give a reasonable time. When it comes to construction, this is even more important, as the court often allows longer delays to enable the owner to remedy the situation.
In the Corpex (1977) inc. c. The Queen in Right of Canada, [1982] 2 RCS 643 the Supreme Court of Canada has ruled on the importance of this delay in allowing the owner to reconsider his positions. If the owner does not receive the formal notice, he or she may not become aware of the defect and be unable to remedy it. So there is a duty to inform.
Should the beneficiary fail to send this formal notice to the owner, there could be serious consequences. Indeed, even if the court has the possibility of using its discretionary power and overruling this breach, the amount of the beneficiary’s compensation could be reduced. There are certain exceptions, however, which mean that the beneficiary is not obliged to send a formal notice, such as in the case of an emergency, or when a formal notice is partly unnecessary, for example if the debtor has expressly stated that he does not wish to remedy the default.
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