Hypothecary Recourse

Whether you’re a creditor about to exercise a hypothecary recourse or a debtor who has been notified that a hypothecary recourse has been instituted against you, we’re here to help!

While many questions can be answered with the help of the guides, sample letters and forms in our legal toolkit, an independent jurist affiliated with PSP Legal will always be happy to help you by answering any questions you may have.

• Online

• By phone

• In person

Of course, if you prefer to have an experienced practitioner take charge of your situation and intervene directly and quickly on your behalf, you can also request that one of the independent jurists affiliated with PSP Legal represent you by clicking here.

Prerequisites for mortgage recourse

Hypothecary recourses are reserved for mortgagees in cases where the debtor is in default of payment. At the time of recourse, the debt must be due and payable.

The exercise of hypothecary rights by a creditor can take four forms:

• Taking possession for administrative purposes;
• Taking in payment;
• Sale by the creditor;
• Sale under court supervision.

These different remedies can therefore be taken by a mortgagee, and it is up to him to decide which one he will use. However, before being able to exercise his mortgage rights, the creditor must comply with certain formalities.

Notice of exercise

When the debtor is in default of payment and the claim is liquid and due, the creditor must first register a notice of exercise with the appropriate registry before undertaking a hypothecary recourse. Under article 2758 of the Civil Code of Québec, the notice of exercise must contain six elements:

• Denounce the debtor’s default;
• Remind the debtor of his right, if any, to remedy the default;
• Indicate the amount of the claim, including capital and interest;
• Indicate the recourse the creditor intends to exercise;
• Provide a description of the mortgaged property;
• Summons the debtor to surrender the property;
• Indicate the deadline for the debtor to surrender the property.

Once the notice has been registered, the debtor has a period of time in which to surrender the mortgaged property. This period also marks the start of the period during which the creditor can exercise his right of recourse. The legal period available to the debtor depends on the nature of the mortgaged property:

• For movables: 20 days;
• For immovables: 60 days;
• If the recourse envisaged by the creditor is taking possession for administrative purposes: 10 days;
• For consumer contracts: 30 days;

The notice of exercise must also be accompanied by proof of service on the debtor. The creditor must therefore notify his debtor that he intends to register a notice of exercise of his hypothecary rights.

If the notice has not been entered in the appropriate register and the creditor exercises a hypothecary recourse, the latter will be cancelled. In order to exercise a recourse, the mortgagee must register a notice of exercise. However, a simple error in the content of the notice of exercise will not automatically render the recourse null and void. To annul a hypothecary recourse containing an error in the content of the notice of exercise, the debtor will have to prove that he has suffered prejudice as a result.

Surrender

Surrender is the second mandatory formality for exercising a mortgagee’s rights. In fact, it is one of the compulsory contents of the notice of exercise. Surrender may be voluntary or forced.

Surrender is voluntary when the debtor abandons the property to the creditor before expiry of the period specified in the notice. The debtor must have a genuine intention to surrender the property for surrender to be voluntary. Silence without a positive gesture does not constitute voluntary relinquishment.

In general, there need not be a written contract attesting to voluntary surrender. However, when the remedy contemplated by the mortgagee is to take the property in payment, a written document is absolutely essential, since the written deed will constitute the creditor’s title to the property.

Forced surrender is where a creditor applies to the court to order the debtor to surrender the property. In this case, several elements must be proven, including :

• The existence of a claim;
• Default by the debtor;
• The debtor’s refusal to voluntarily surrender the property;
• The absence of a valid reason for opposition on the part of the debtor.

How we can help

Our legal toolkit includes a variety of online resources and links to templates and guides to help you better understand your obligations.

However, should the Legal Toolkit prove insufficient in your situation, you can obtain additional assistance by speaking with one of PSP Legal’s affiliated jurists:

• Online

• On the phone

• In person

Of course, if you prefer to have an experienced practitioner handle your situation, you can always request that one of the independent jurists affiliated with PSP Legal intervene on your behalf by clicking here. He or she will then be able to intervene directly and rapidly on your behalf by:

• Preparing, negotiating and drafting applications, procedures or any other legal documents related to your situation;
• Assisting and advising you on your legal rights and obligations;
• Representing you before the courts when legal action is taken;
• Guiding you through the choices available to you, leading to a fair and satisfactory solution.

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