Different types of claims
Claims of the State and of legal persons established in the public interest
The legal mortgages of the State and of legal persons established in the public interest may charge movable or immovable property. As specified in the priorities, the word “State” here refers to Québec and does not include the federal government (as the Civil Code of Québec is provincial legislation).
Therefore, the provincial government will be able to benefit from a legal mortgage for any amounts owed to it under tax laws, including income tax, provincial sales tax, source deductions, etc.
Legal persons established in the public interest may obtain a legal mortgage only where specific implementing legislation provides for this possibility.
Claims of persons having taken part in the construction or renovation of an immovable
Only immovables that have been built or renovated can be charged with a legal mortgage. This mortgage exists only in favour of the following persons who have actually taken part in the construction or renovation of an immovable for the work requested by the owner of the immovable, or for the materials or services provided, namely:1
- Architect
- Engineer
- Supplier of materials
- Workman
- Contractor or subcontractor
It is not necessary to publish a legal mortgage for it to exist61 and it subsists, even if it has not been published, for 30 days after the work has been completed.2
It subsists if, before the 30 days expire, a notice describing the charged immovable and indicating the amount of the claim is registered in the Land Register. The notice shall be served on the owner of the immovable.
In cases where such a notice has been registered, it is extinguished six months after the work is completed, unless the creditor publishes an action against the owner of the immovable or registers a prior notice of the exercise of a mortgage right.3
The mortgage secures the increase in value given to the immovable by the work, materials or services supplied or prepared for the work. However, where those in favour of whom it exists did not themselves enter into a contract with the owner, the mortgage is limited to the work, materials or services supplied after written notice of the contract to the owner. A workman is not bound to give notice of his contract.4
To be entitled to the legal construction mortgage, the above-mentioned persons must therefore enter directly into a contract with the owner of the immovable. If they do not enter into a contract with the owner, they must notify the owner of their contract in writing by a means providing proof of receipt. This notice indicates the nature of the contract, the amount of the contract, the start and end dates of the work and the address of the work. This notice must be sent before work begins.
Once the work has been completed, any of the above-mentioned persons who has not been paid must, within 30 days of completion of the work, publish a notice of legal mortgage.5 It should be noted that completion of the work is determined when the immovable can be used for its intended purpose; this does not necessarily mean completion of the work by the subcontractor in particular. In other words, there is only one completion of the work and not one for each trade involved in the construction or renovation of the immovable.6
Once published, the legal mortgage notice remains valid for six months. Within the six-month period, the creditor must serve the owner with a prior notice of exercise of a mortgage right or take legal action.7
Failing to do so, the creditor’s notice of legal mortgage will no longer be valid and the owner may require the creditor to have it cancelled at the creditor’s expense. The creditor then loses his legal guarantee, but retains his personal recourse against his debtor.
One of the special features of a legal construction mortgage is that it ranks before any other types of mortgage, whether conventional or legal, regardless of whether they were registered in the Land Register before or after.8
► DUTIES AND OBLIGATIONS OF THE BROKER
Sale or purchase of a new construction
If you are contacted by a building contractor or real estate developer to handle the marketing of new homes, or if you have a client interested in purchasing this type of property, you are bound by your duties and obligations under the Real Estate Brokerage Act and the Regulation respecting brokerage requirements, professional conduct of brokers and advertising.
However, when it comes to real estate transactions involving new constructions, the OACIQ regularly comes across problem situations which could have been avoided with a few extra precautions.
To properly carry out your role as representative of the seller or the buyer, you will find a number of points with which you need to be vigilant in the article Sale or purchase of a new construction: Rules to follow.
1 S. 2726 C.C.Q.
2 S. 2726 C.C.Q.
3 S. 2727(1) C.C.Q.
4 S. 2727(3) C.C.Q.
5 S. 2728 C.C.Q.
6 S. 2727(1) C.C.Q.
7 Denise PRATTE, Les priorités et les hypothèques, dans École du Barreau du Québec, « Collection de droit 2013-2014, vol. 6, Contrats, sûretés, publicité des droits et droit international privé », Cowansville, Éditions Yvon Blais, 2013, pp. 170-171.
8 S. 2727(3) C.C.Q.
9 S. 2952 C.C.Q.
Claims of syndicates of co-owners
This mortgage charges the fraction of the co-owner who has defaulted for more than 30 days on payment of his common expenses or his contribution to the contingency fund,10 and has effect only from registration of a notice indicating the nature of the claim, the amount owing on the day the notice is registered, and the expected amount of charges and claims for the current financial year and the next two years.11
This legal mortgage is extinguished three years after it is registered, unless the creditor publishes an action against the co-owner who has defaulted or registers a prior notice of exercise of a mortgage right.12
10 S. 2729 C.C.Q.
11 S. 2729 C.C.Q.
12 S. 2800 C.C.Q.
Claims under a judgment13
The final category of claim that can give rise to a legal mortgage is that which results from a judgment. A creditor who has obtained a judgment from a court with jurisdiction in Québec ordering the payment of a sum of money may acquire a legal mortgage on the movable or immovable property of his debtor.
He may acquire it by registering a notice describing the property charged with the mortgage and specifying the amount of the obligation, and, in the case of an annuity or support, the amount of the instalments and, where applicable, the basis of indexation. The notice must be served on the debtor with a copy of the judgment.14
In Québec, judgments become prescribed after a period of ten years. At the end of this period, if the creditor has not exercised his remedies, the debt equivalent to the amount of the judgment is extinguished. Consequently, the mortgage no longer has effect.
13 S. 2724 (4) C.C.Q.
14 S. 2730 C.C.Q.
