Lawyers in legal hypothecs

The legal hypothec is a guarantee that arises directly from the law. Unlike the conventional mortgage, it is not the result of an agreement between the parties. In Quebec, the legal hypothec can take different forms, including that linked to the construction and renovation of real estate.

The legal construction hypothec aims to protect the rights of those involved in the construction or renovation of a building (architects, workers, material suppliers, etc.). If a debt resulting from this work is not settled, the legal construction hypothec allows these actors to apply security on the building concerned. This security can lead to the sale of the building in court in order to recover the sums owed.

The legal mortgage plays a vital role during the construction of a house. It serves above all to protect the rights of the actors involved in the project (architects, workers, material suppliers) in the event of non-payment.

Indeed, when a debt resulting from this work is not settled, the actor concerned has the possibility of depositing a legal hypothec on the building. This security is registered in the Land Register and can potentially lead to the sale of the building in court to recover the sums due.

It should be noted that the application of the legal hypothec is not systematic. It depends on several factors such as the type of work carried out, the amount of the debt or the nature of the contract entered into between the parties.

The relevant article in the ccq

Article 2726 of the Civil Code of Quebec (CCQ) is often cited in matters of legal construction hypothec. It stipulates that a legal hypothec in favor of people who participated in the construction or renovation of a building can only encumber this building. It is acquired only in favor of architects, engineers, material suppliers, workers, contractors or sub-contractors who have carried out the work requested by the owner.

Another relevant article is article 2952 of the CCQ. It indicates that legal hypothecs in favor of participants in the construction take priority, for added value, before all other hypothecs, even published before. These mortgages compete with each other, proportionally to the value of each debt.

Finally, article 1051 of the CCQ specifies that the legal hypothec of the construction, registered following work carried out throughout a co-ownership, is shared between the fractions held by each of the co-owners. This sharing varies according to the relative value specific to each fraction.

Article 2726 of the Civil Code of Quebec (CCQ) offers specific protection to those involved in the construction or renovation of a building. Their work, if it brings added value to the building, can thus give rise to a legal hypothec. However, the scope of this article is limited to certain types of work. For example, the installation of goods which retain their movable nature cannot give rise to the registration of a legal hypothec in the field of construction.

In addition, article 2727 of the CCQ specifies that this legal hypothec remains, even if it has not been published, for 30 days following the end of the work. This deadline is crucial for those involved in the construction site, because it allows them to take the necessary measures to protect their rights in the event of non-payment.

How to interpret this CCQ article?

Interpreting article 2726 of the CCQ requires an understanding of several legal concepts . First of all, the article applies exclusively to people who participated in the construction or renovation of a building.

This implies that only those who have contributed to work which has increased the value of the building can benefit from this mortgage. In addition, this mortgage can only encumber the building concerned by this work.

It is also essential to take into account the rank of this mortgage. As specified in article 2952 of the CCQ, this mortgage has priority over all others, even those published before, with regard to the capital gain.

Finally, article 1051 of the CCQ provides details on the legal hypothec in the context of co-ownership . Thus, in the event of work on the entire co-ownership, the mortgage is shared between the different co-owners according to the value of each fraction.

The entrepreneur plays a major role in the legal mortgage registration process. As the main actor in construction or renovation work, he is often the one who has the most to gain from the application of this security in the event of non-payment.

The entrepreneur must hold the licenses required by law to benefit from the legal hypothec. This is an effective way for him to guarantee his debts and protect himself against payment defaults.

The legal hypothec gives the entrepreneur the privilege of registering a mortgage notice on the building concerned, thus offering a guarantee of being paid from the building in the event of default. However, the law also allows parties to waive the legal construction hypothec in advance, an agreement by which the contractor waives his rights and effects conferred by the legal hypothec, thereby protecting the owner.

Therefore, knowledge and mastery of the legal mortgage process are essential for the entrepreneur, because they directly influence the security of their debts and the success of their projects.

What happens if the work is abandoned?
In the event of abandonment of the work, several legal consequences are to be expected.

First, the legal hypothec remains valid even if the work is abandoned. It remains, whether it has been published or not, for 30 days following the end of the work. This 30-day period applies both in the event of completion of the work and abandonment.

Then, if abandoning the work results in no added value on the building, the work will not give rise to the registration of a legal hypothec. Indeed, only work which brings added value to the building can give rise to the registration of a legal hypothec, according to article 2727 al. 2 and 3 CCQ

Finally, if the work is abandoned and never resumed, the legal hypothec can lead to a registration against the title of the building for several million dollars.

Cancellation of the mortgage at the end of the work
Completion of the work is a crucial step for the cancellation of the mortgage. After the end of the work , the mortgage holder has a period of six months to exercise his right against the building. If no action is taken during this period, the mortgage is automatically extinguished.

However, it is important to emphasize that the legal concept of “end of work” may differ from current definitions. In the context of the legal hypothec, the end of the work is generally declared when all the work planned in the construction project is completed.

The cancellation of the mortgage can be carried out upon simple request after the expiration of the six-month period. Additionally, delisting requests are processed expeditiously, making the process easier for the parties involved.

The notary plays a central role in the cancellation of the legal hypothec. Indeed, according to Quebec law, only lawyers and notaries are authorized to prepare the cancellation document. This document is essential because it makes it possible to formalize the end of the legal hypothec. Once prepared, it is transmitted to the Land Registry Officer who then proceeds to the cancellation of the registration of the creditor's rights.

It should be noted that the cancellation of the registration of the notice of legal hypothec can be obtained with the consent of its beneficiary, provided that no action has been brought and published on the immovable concerned. As such, the notary can assist in obtaining this consent and ensuring that all conditions are met for a successful expungement.

In addition, the notary, as a legal advisor, can explain in detail your rights and obligations regarding the legal construction hypothec. He can also guide you through the various legal procedures relating to legal hypothec.