Legal Construction Hypothec

Whether you are an individual or a company that has just learned that it is subject to a legal hypothec or, rather, you have questions about it, we are 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.

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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.

What is a legal hypothec?

Legal hypothecs are those established by law. The only legal hypothecs that exist are listed in article 2724 of the Civil Code of Québec.

Legal hypothecs are part of a special regime. Hypothecary creditors holding a legal hypothec are not subject to the same rules as other hypothecary creditors, particularly with regard to the creation and publication of the hypothec. A legal hypothec confers a preferential rank on the creditors who are the subject of such a hypothec. It therefore takes precedence over all other claims, with the exception of priority claims.

Moreover, it is impossible to contractually provide for a hypothec to be legal, since the Civil Code of Quebec provides an exhaustive list of such hypothecs:

• The legal hypothec of the State and certain legal persons;
• The legal hypothec of the construction industry;
• The legal hypothec of the Syndicate of Co-ownership;
• Judgment hypothecs.

The various legal hypothecs

State and corporate legal hypothecs

The State’s legal hypothec applies to sums owed under tax laws. It can therefore cover amounts relating to taxes and fines.

The hypothec can be placed on movable or immovable property to secure unpaid amounts. In addition, a public corporation may also hold a legal hypothec on movable or immovable property when provided for by specific legislation. For example, Hydro-Québec may enforce a legal hypothec on the property of a company in default of payment, as provided for in section 31 of the Hydro-Québec Act.

The legal hypothec of the State and certain legal persons must be registered in the appropriate register by means of a notice of requisition, and served on the debtor.

Construction hypothecs

A legal hypothec exists for certain types of builders. Certain formalities must also be fulfilled before it can come into existence.

Legal hypothec for Syndicates of co-ownership

The Syndicate of a divided co-ownership can benefit from a legal hypothec on the fraction of the co-owner in default. The hypothec secures the co-owner’s share of common expenses and contingency fund contributions. Failure to pay these charges for at least one month gives rise to a legal hypothec.

To be valid, the Syndicat de copropriété’s legal hypothec must be entered in the land register. The Syndicate does not have to notify the debtor that it holds a legal hypothec against him, nor does it have to inform the other co-owners of the immovable. In addition, the registration will be valid for three years. To have the registration cancelled, the co-owner may file a request for cancellation with the register, or a judgment against the hypothecary recourse.

Legal hypothec resulting from a judgment

The legal hypothec resulting from a judgment is granted by a judge, but its source is the law. It is not, therefore, expressly created by the mere will of the judge. The law provides that certain types of judgments may be accompanied by a legal hypothec.

The legal hypothec resulting from a judgment is often used in the context of the Bankruptcy and Insolvency Act. Indeed, when a company applies to a court for temporary financing as part of a reorganization, a legal hypothec will generally be assigned to the creditor who has agreed to finance the company. The purpose of this hypothec is to ensure that the creditor who agrees to finance a company in financial difficulty can be paid before the company’s other creditors.

Anyone acquiring a legal hypothec resulting from a judgment must register it in the appropriate register, taking care to describe the property that is the subject of the hypothec. The beneficiary must also notify 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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