Conventional immovable or movable mortgage
Conventional immovable mortgage
The Civil Code of Québec states that a conventional mortgage may only be granted by a person who has the capacity to sell the property.
Why grant a mortgage?
A mortgage is a form of payment guarantee.
Example: Marie borrows $200,000 from the bank to buy a house. The bank grants a loan. To ensure payment, the bank will require a mortgage guarantee on the house. The contract to be signed by Marie will indicate the obligation she is entering into, i.e. the deed of loan and the accessory contract, which is the mortgage. In this example, we are talking about a loan secured by immovable mortgage.
A mortgage can also be granted to secure a line of credit or even a suretyship.
These guarantees are widely used by businesspeople who own a company.
Example: François wants to obtain a loan for his registered business. The bank requires a personal surety from François to guarantee his company. François will then give a mortgage guarantee on his personal residence to guarantee repayment. Should François’ company fail to repay the loan, the bank will use the suretyship contract to obtain François’ personal guarantee and may ask that François’ house be sold in order to be repaid. In this case, we are talking about a mortgage guarantee.
It is important to mention that in order to be valid, a conventional immovable mortgage must be notarized en minute1 and specifically identify the mortgaged property.2 This mortgage must be published in the Land Register of the registration division where the immovable is located. The act constituting a mortgage must indicate the specific sum for which it is granted, even if the value of the obligation cannot be determined or is uncertain.3
A conventional immovable mortgage ranks according to its date of publication in the Land Register.
In a nutshell
To be valid, a conventional immovable mortgage must:
- Be notarized en minute
- State the cadastral designation of the immovable
- Be published in the Land Register of the appropriate registration division
- Indicate the sum for which it was granted
Important note: It is valid for 30 years following its publication.
1 S. 2693 C.C.Q.
2 S. 2694 C.C.Q.
3 S. 2689 C.C.Q.
Conventional movable mortgage
Without delivery
A movable mortgage is with or without delivery. If it is without delivery, it shall, on pain of absolute nullity, be granted in writing.4
The constituting act must contain a sufficient description of the mortgaged property or, in the case of a universality of movables, an indication of the nature of that universality.5 The mortgage shall be published in the Register of Personal and Movable Real Rights (RDPRM).
The movable mortgage without delivery is widely used by business people.
Example: The bank grants a loan to company ABC Inc. The company provides a movable guarantee on the company’s assets, both its inventory and equipment.
“The person or the trustee may thus mortgageate animals, tools or equipment pertaining to the enterprise, claims and accounts receivable, patents and trademarks, or corporeal movables included in the assets of any of his enterprises kept for sale, lease or processing in the manufacture or transformation of property intended for sale, for lease or for use in providing a service.”6
In residential real estate brokerage, this type of mortgage will have very little impact on the broker’s work since the legislator has restricted the scope of such a mortgage to the assets of an enterprise; personal property cannot be subject thereto.
Validity criteria
To be valid, the movable mortgage without delivery must:
- Be evidenced in writing (notarized or under private seal)7
- Indicate a sufficient description of the movable property or the nature of its universality, if this is the case8
- Be published in the RDPRM.9
Important note: It is valid for 10 years following its publication.10
Like any other mortgage, a movable mortgage without delivery ranks as soon as it is registered in the RDPRM.11
With delivery
A movable mortgage with delivery is published by the creditor’s holding the property or title, and remains so only as long as he continues to hold it. Movable property, both for consumption and business purposes, may be subject to this.
This type of mortgage does exist, but it has no impact on the real estate broker’s work since the movable property is not in the debtor’s possession and cannot be part of the inclusions.
Validity criteria
To be valid, the movable mortgage with delivery:
- Does not require writing; simply delivering the property to the creditor is sufficient.12
- Is published by the creditor’s holding title, and remains so only as long as he continues to hold it.13
All consumer or business property can be mortgaged this way, except for property exempt from seizure.14
Important note: It is valid for 10 years following the delivery of the property. However, the pledge is extinguished upon termination of detention by the creditor, i.e. when the creditor returns the property to the debtor.15
4 S. 2696 C.C.Q.
5 S. 2697 C.C.Q.
6 S. 2684(2) C.C.Q.
7 S. 2696 C.C.Q.
8 S. 2697 C.C.Q.
9 S. 2698-2700, 2711 and 2716 C.C.Q.
10 S. 2798 C.C.Q.
11 S. 2698 C.C.Q.
12 S. 2702 C.C.Q.
13 S. 2703 C.C.Q.
14 S. 2668 C.C.Q.
15 S. 2798 C.C.Q.
