Priorities

Whether you’re an individual or a company facing a priority, or rather, have questions about one, 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.

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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 priority?

A priority is similar to a security interest. It entitles a creditor to preference over other creditors, depending on the cause of the claim. Priority claims take precedence over mortgagees and legal hypothecs.

Priority claims derive from the law. No agreement is required to give priority to a claim. However, the law provides for an exhaustive and restrictive list of priority claims. It is therefore not possible to avoid this list, or to provide that another claim not covered by the law be given priority. Priority claims are listed in article 2651 of the Civil Code of Quebec:

• Legal costs and expenses of common interest;
• Unpaid seller’s claims;
• The claim of a lien on movable property;
• Certain government claims;
• Certain municipal or school board claims.

The order of priority claims is set out in article 2651 of the Civil Code of Québec. Priority claims are therefore ranked in the above order.

In principle, priority claims do not need to be published in a register; they arise automatically. In addition, these claims do not generally confer a right of resale.

Priority claims

Legal costs and expenses of common interest

Claims relating to legal costs or expenses incurred in the common interest may be asserted against movable or immovable property. Legal costs are mainly judicial fees, seizure and sale costs, and costs incurred in drawing up the creditors’ statement of claim. Expenses incurred in the common interest are generally costs incurred to protect or preserve the property from loss or diminution in value (e.g. custodial and storage costs).

Unpaid seller’s claim

This claim is for the benefit of a seller who has sold personal property to an individual who does not operate a business. The seller has a prior claim on the personal property. However, he has no right of pursuit, so if the individual sells the item to a third party, the unpaid seller loses his priority claim.

Right of retention

The holder of a right of retention of movable property has a priority claim on the property, in addition to the right to retain it until full payment has been made. The holder is a détenteur when he has the property; in fact, he has been given the property to hold voluntarily by a contract between him and the owner of the property. He has the power to retain the property if the owner has not fulfilled his obligations. To benefit from a priority claim, the seller must ensure that he is a holder by complying with the conditions of article 1592 of the Civil Code of Quebec:

• There is a contract between the unpaid seller and the owner of the movable property, characterized by the voluntary surrender of the property;
• The unpaid seller’s claim is exigible;
• The claim is related to the property;
• The ownership of the property is peaceful, continuous, public and unequivocal, in accordance with article 922 of the Civil Code of Québec.

If these conditions are met, the unpaid seller can claim priority on the movable property.

A problem may arise in the case of an unpaid seller who holds the property, but must voluntarily relinquish it to a hypothecary creditor exercising a hypothecary recourse. In this case, the unpaid seller does not lose his priority, and will therefore be able to claim it at the time of sale of the property in order to be paid in priority.

Certain government debts

Amounts owed under tax laws (e.g. taxes and fines) can be priority claims. This priority extends to all the debtor’s movable property. The State’s priority cannot extend to real estate. However, the State may assert its legal hypothec. Moreover, if the State wishes to obtain a security interest in the debtor’s immovable property, it can use the legal hypothec. It should be noted, however, that the legal hypothec carries with it a right of pursuit, not a priority for the State.

In principle, the State will not have to register its priority or serve it on the debtor. However, it may be forced to do so by one of the debtor’s mortgagees. A hypothecary creditor who has registered a notice of hypothecary recourse can force the State to waive its priority. The State will have 30 days to register its claim in the Register of Personal and Movable Real Rights, failing which it will become an ordinary claim.

Claims by municipalities and school boards

Municipalities and school boards have priority for their property taxes. These claims can be paid only on immovables. Municipalities and school boards may also have a priority claim on movable property if a specific law permits so. In addition, the priority claims of municipalities and school boards are constitutive of real rights, thus granting a right of resale should the immovable be sold to a third party or repossessed by a hypothecary creditor. This priority is enforceable against third parties and creditors without the need for publication.  

Recourse

Priority creditors are not considered to be mortgagees. Consequently, they cannot institute hypothecary recourses. They may, however, join a hypothecary recourse initiated by one of the debtor’s hypothecary creditors in order to assert their rank. The only recourse for priority creditors is that of the general law, i.e. personal action.

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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