To make use of the legal hypothec of persons who have participated in the construction or renovation of an immovable (hereinafter referred to as a ” legal construction hypothec “), certain steps must be followed, as part of a formal process defined by the Civil Code of Québec and specified in case law.
Apart from individuals and companies who are obliged to terminate their contracts, registration of the legal mortgage is the first step in this formal process. Contractors, sub-contractors (such as plumbers, electricians, carpenters and other specialized trades), material suppliers, tradesmen, engineers and architects must register their legal construction hypothec to preserve it.
In concrete terms, this involves publishing a notice in the Land Register and communicating this notice to the persons concerned. This registration will make it possible to preserve the legal construction hypothec on the building in question and, ultimately, to use the building as security for payment of sums owed to those who participated in the building’s construction or renovation.
As a general rule, it is the beneficiary of the legal construction mortgage who is responsible for registering it in the Land Register. The Civil Code of Quebec does not explicitly define the notion of beneficiary, butarticle 2726 does mention that the legal hypothec of construction benefits “the persons who participated in the construction”.
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 architects, engineers, material suppliers, workmen, contractors or sub-contractors, by reason of the work requested by the owner of the building, or by reason of the materials or services they have supplied or prepared for this work. It exists without needing to be published.
Source: Civil Code of Québec, RLRQ c CCQ-1991, art 2726
Registration is generally carried out by a lawyer or notary, sincearticle 2991 of the Civil Code of Québec requires that the deed be attested by a legal professional:
2991. The private deed giving rise to the registration or deletion of a right in the Land Register, or to the reduction of a registration, must indicate the date and place where it was drawn up; it must be accompanied by a certificate from a notary or lawyer that he has verified the identity, status and capacity of the parties, the validity of the deed as regards its form and that the document reflects the will expressed by the parties.
Source: Civil Code of Québec, RLRQ c CCQ-1991, art 2726
In fact, all mortgage deeds produced by Hypotek are attested by lawyers who are members of the Quebec Bar, to ensure strict compliance with legal requirements.
The deadline for filing the registration of a legal hypothec is very short. In fact, if the beneficiary wishes to avail himself of the legal hypothec, he must publish his legal construction hypothec within 30 days of completion of the work.
Article 2727 of the Civil Code of Quebec sets out this mandatory deadline:
2727. The legal hypothec in favour of persons who have participated in the construction or renovation of an immovable subsists, even if it has not been published, for 30 days following completion of the work.
It is retained if, before the expiry of this period, a notice designating the encumbered immovable and indicating the amount of the claim has been registered. This notice must be served on the owner of the building.
It expires six months after completion of the work, unless the creditor publishes an action against the owner of the building to preserve the mortgage, or registers a notice of exercise of a mortgage right.
Source: Civil Code of Quebec, RLRQ c CCQ-1991, art 2727
Thus, to preserve the rights arising from the legal construction mortgage, the beneficiary must publish the whole and serve the registration on the owner of the property.
However, the notion of “completion of work” is often ambiguous, leaving room for interpretation by the courts. In any event,article 2110, para. 1 of the Civil Code of Québec nevertheless provides that the end of the work is usually when the property is ready for use:
2110. The customer is obliged to take delivery of the work at the end of the work; this occurs when the work has been completed and is in a condition to be used in accordance with its intended purpose.
Acceptance is the act by which the customer declares acceptance of the work, with or without reservations.
Source: Civil Code of Québec, RLRQ c CCQ-1991, art 2110
At the same time, case law teaches that the completion date is generally the date on which all construction-related tasks are completed. So, even if there are many different stages to the project, and different workers involved, there’s only one end date for everyone. If this 30-day period is not respected, the rights associated with the legal construction mortgage will be extinguished and will no longer exist. In short, the notion of completion is more a question of fact, which varies from case to case.
Once we’ve established who needs to register, and within what timeframe, we’ll need to meet certain criteria before registration can proceed. First of all, the legal construction mortgage is published by sending a notice to the Land Registry. In such a case, the criteria set out in the first paragraph ofarticle 2981 of the Civil Code of Québec must be met:
2981. In addition to the particulars required by law or by the regulations made pursuant to this book, requests for entry in the land register shall include the names of the holders and grantors of the rights to which they relate, as well as the description of the property concerned.
Applications for registration in the Register of Personal and Movable Real Rights shall identify the owners and grantors of the rights, describe the rights, identify the property concerned and mention any other relevant facts for publicity purposes, as prescribed by law or by the regulations made pursuant to this Book.
Source: Civil Code of Quebec, RLRQ c CCQ-1991, art 2981
In addition, the notice must be served on the owner of the building to be valid. Finally, once the legal construction mortgage has been entered in the Land Register, it will be made public to all interested parties and will produce all its legal effects.
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