Types of mortgages

In the legal sense, a mortgage is a “security”. It is a guarantee for a creditor so that he has a means of enforcing the obligation to which his debtor is bound in the event of the occurrence of any problematic situation.

A mortgage can be either conventional or legal[1]. The main distinction between these two forms of mortgage lies in their source.

On the one hand, a conventional hypothec is based on the ability of the parties to agree to such an act and, among other things, of the grantor to consent to it and to dispose of the property to be encumbered by the hypothec[2]. In other words, the parties must be considered capable of entering into a juridical act under the provisions of the Civil Code of Quebec. More generally, this means a person of full age who is not under any form of protection[3 ], or a fully emancipated minor[4]. In addition, the grantor must also have the capacity to dispose of the assets to be mortgaged[5]. The ability to dispose of the property can be summed up as the grantor’s ability to sell the property itself[6 ] .

Legal hypothecs, on the other hand, do not depend per se on the consent of the parties to agree to a hypothec on movable or immovable property. In fact, the legal hypothec is derived from the law, whether the Civil Code of Quebec or specific statutes[7]. Let’s take a look at article 2724 of the Civil Code of Québec to present the 4 cases in which a legal hypothec can be registered:

2724. The only claims that can give rise to a legal mortgage are the following:

1° Claims of the State for sums due under tax laws, as well as certain other claims of the State or legal entities governed by public law, specially provided for in specific laws;

2° Claims by persons who have participated in the construction or renovation of a building;

3° The co-owners’ association’s claim for payment of common expenses;

4° Claims arising from a judgment.

In addition, some examples of legal mortgages created under specific laws include[8]We invite you to consult the following laws for examples: the Act respecting the protection of agricultural land and agricultural activities [9] the Act respecting industrial accidents and occupational diseasesthe Cities and Towns Act[10] or the Act respecting land use planning and development[11].

Article 2724 of the Civil Code of Québec expressly and restrictively provides for the following cases of legal hypothecation[12]. These choices have therefore been explicitly made by the legislator. This reflects the importance attached by the legislator to ensuring that the creditors referred to in article 2724 can benefit from a payment guarantee. In fact, public interest reasons have been invoked to justify the granting of this status to certain claims that may be subject to legal hypothecs.[13].

In conclusion, although there are certain specificities applicable to legal mortgages compared to conventional mortgages, it should be noted that many general rules will apply to both types of mortgages.

Samuel Grisé, lawyer

[1 ] Art. 2664, para. 2 C.c.Q.

[2] Arts. 1409, 2681, al.1 C.c.Q. and Pratte, at paragraph 169.

[3] Arts. 153 and 154 C.c.Q.

[4] Art. 176 C.c.Q.

[5] Art. 2681, para. 1 C.c.Q.; We are talking here about hypothecs resulting from a claim by the State or a legal person governed by public law.

[6] Art. 947 C.c.Q.

[7] Art. 2724, para. 1 C.c.Q.; See also art. 134 (4) and (5) of the Act respecting the implementation of the reform of the Civil Code.

[8 ] Art. 2724, par. 1 (1) C.c.Q.

[9] Art. 84

[10] Art. 29.22, 482.1, 482.2

[11] Art. 1, 117.14, 145.41, 148.0.17, 232 and 233

[12] Ministère de la Justice, Commentaires du ministre de la Justice – Le Code civil du Québec , t. 2, Québec, Les Publications du Québec, 1993.

[13] Giuseppe Morrone, “Les principales règles relatives aux priorités et aux hypothèques” in École du Barreau du Québec, Contrats, sûretés, publicité des droits et droit international privé, Collection de droit 2021-2022, vol. 7, Montréal (Qc), Éditions Yvon Blais, 2021, 127