The prior notice of exercise of a mortgage right
The prior notice is not the remedy. When the debtor defaults on payment, the bank will want to terminate the contract. To do so, the bank, which is the mortgagee, must send a prior notice of exercise to the debtor and then have it published at the Bureau de la publicité des droits, together with evidence that the notice has been served on the debtor and, where applicable, on the grantor and on any other person against whom it intends to exercise its right.1
To remedy the default, the debtor must pay the bank within this period. This will render the bank’s recourse unnecessary.
Content of the prior notice2
- Disclosure of the failure by the debtor to perform his obligations
- The right of the debtor or of a third person to remedy the default
- Disclosure of the amount of the claim in principal and interest
- The nature of the mortgage right which the creditor intends to exercise
- A description of the charged property; and
- Demand to the person against whom the mortgage right is to be exercised that the property be surrendered before the expiry of the period specified
Period in which to exercise a claim following registration of the prior notice
SITUATION AND PERIOD
Movable property: 20 days after registration
Immovable property: 60 days after registration
Taking possession of the movable or immovable property for purpose of administration: 10 days after registration
The voluntary alienation of property charged with a mortgage, effected after the creditor has registered a prior notice of the exercise of a mortgage right, may not be set up against the creditor unless the acquirer, with the consent of the creditor, personally assumes the debt, or unless a sum sufficient to cover the amount of the debt, interest due and the costs incurred by the creditor is deposited.3
Generally, the creditor simply wants to get paid. If the debtor manages to sell the immovable before the expiry of the notice period, he can reimburse the bank.
1 S. 2757 C.C.Q.
2 S. 2758(1) C.C.Q.
3 S. 2760 C.C.Q.
► DUTIES AND OBLIGATIONS OF THE BROKER
When a broker enters into a brokerage contract for the sale of an immovable subject to a prior notice of exercise of a mortgage right, he must:
- make sure the listing price covers the mortgage debt
- allow for a reasonable period in which to complete the sale
- If a client retains the services of a broker to sell a home subject to a prior notice of exercise, no personal, confidential or strategic information may be disclosed without the client’s written authorization.4
- As the notice of exercise of a mortgage right must be published in the Land Register, it is public and constitutes relevant information for a buyer. The seller’s broker must inform his client that he is required to disclose this information to any prospective buyer.
- Lastly, even if the seller’s financial situation is precarious, this information must not be disclosed to a potential buyer until a notice has been entered in the Land Register.
4 Regulation respecting brokerage requirements, professional conduct of brokers and advertising (c. C-73.2, r.1, s. 15 (2).
