The legal construction hypothec is a mechanism under the Quebec Civil Code that protects contractors, subcontractors, and suppliers unpaid for their work or materials. Less known than the conventional mortgage, it can nonetheless have a major impact on a property and its owner. This article outlines its principles, deadlines, consequences, and available solutions.
What is a legal construction hypothec?
A legal construction hypothec is a right granted by law to persons who have made building improvements. Without a direct contract with the owner, it acts as an automatic guarantee to ensure payment for the work or materials provided.
Unlike other legal mortgages (government, court judgment, co-ownership), it applies only to construction and renovation projects.
Québec Civil Code: An Overview of the Law
The Quebec Civil Code provides for this right in sections 2726 and further. Basically, this means that a contractor or supplier can register a legal hypothec on a building if the amounts owed are not paid.
What types of work can qualify for a legal hypothec?
Only work that enhances the value of the property is covered, such as:
- new construction,
- additions,
- major renovations.
However, maintenance work or minor repairs do not entitle the customer to this protection.
Where does the legal construction hypothec rank in priority?
This hypothec holds priority over many other claims, making it a very powerful tool. It even takes precedence over some previously registered conventional mortgages, thereby strengthening the protection for construction creditors.
Who can benefit from this hypothec?
The main beneficiaries are:
- general contractors,
- subcontractors,
- material suppliers,
- certain professionals (architects, engineers).
- anyone who has contributed directly or indirectly to the work can assert this right.
Steps and deadlines to follow in order to enforce a legal hypothec
To protect their rights, subcontractors must first inform the property owner about their contract, even if they don’t have a direct relationship with them. They then have 30 days after the work is finished to register a notice of hypothec with the land registry. If they miss this deadline, they lose their claim. After filing the notice, the creditor has six months to submit a notice of exercise; otherwise, the hypothec becomes invalid. The date when the work is completed is very important because it starts all the deadlines. However, this date can be challenged, especially if there are attempts to delay it by doing minor work.
Impact on the owner
A legal construction hypothec can block the sale of a property, prevent bank refinancing, and may lead to a forced sale if the debt remains unpaid. It can also arise from a halted or unfinished construction project, a situation that often causes tensions and legal disputes.
Can you sell a house with a legal construction hypothec on it?
Technically, yes. But in reality, it’s quite difficult. Most buyers won’t go through with the purchase unless the hypothec is cleared beforehand, which usually means the seller has to pay off the debt before the deal can close.
What can homeowners do to protect themselves?
Before buying a property, it is wise to check the land registry to make sure there are no legal construction hypothec filed against it. It’s also a good idea to ask subcontractors or suppliers for a release or waiver once they’ve been paid, to avoid any future claims.
If the debt has been paid or the registration is unjustified, the owner can request the hypothec to be discharged, often through legal action. Holding back funds during a project also remains a safe and effective practice to protect against potential claims.
Contact the Lauréat Finance teamIn the event of a dispute: what remedies are available to the owner in the event of a legal construction hypothec?
In the event of disagreement, a property owner may take legal action to have a mortgage deemed unfair or non-compliant removed. For their part, creditors retain the right to claim what they are owed, in particular by requesting the sale of the property under court supervision in order to recover unpaid sums.
Solutions for homeowners in financial difficulty
When a legal hypothec blocks a transaction or financial situation, it is sometimes necessary to resort to a private mortgage loan.
At Lauréat Finance, we offer financing solutions ranging from $10,000 to $1,000,000, allowing you to quickly settle debts related to a legal mortgage. This approach gives you a new financial lease on life and prevents you from losing your property.
Learn More About Our Loan SolutionsLegal hypothec and purchasing a new property
Before buying a new home, it is essential to check whether a legal mortgage has been registered. Too often overlooked, this step prevents unpleasant surprises after the purchase.
Conclusion
The legal construction hypothec is a powerful tool to protect creditors, but it can have significant consequences for homeowners. Knowing the deadlines, steps, and available remedies helps avoid many complications.
In case of difficulties, solutions such as private refinancing can help lift the hypothec and protect your property. At Lauréat Finance, we are here to support homeowners through these processes and offer concrete options to navigate challenging situations.
About the author
Co-President
A former mortgage broker, Mr. Nelson has long been passionate about alternative mortgage financing. He specializes in crafting detailed, strategic plans to help clients quickly return to traditional financial institutions. With over $300 million in alternative mortgage financing completed, he joins forces with his partner to ensure every client receives the most fitting solution. Frequently on the move, he always makes time to meet with clients in person—clearly explaining the proposed mortgage product, tailored to each unique situation.
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