The Entrepreneur and the Legal Htpothec
The legal hypothec remains one of the most powerful remedies in the construction industry in Quebec.
Under article 2726 of the Civil Code of Quebec, the beneficiaries of the legal hypothec are the contractor (general or specialized), the worker, the architect, the engineer and the supplier of materials.
This effective means aims to guarantee to people who have participated in the construction or renovation of a building, the payments due to them for the work they have carried out. As a last resort, the legal construction hypothec can allow the beneficiary to have the building in question sold in court in order to have his debt paid.
Obligation
To benefit from the legal hypothec, a contractor or sub-contractor must hold the licenses required by law. (Article 50 of the Building Law).
To find out about the RBQ license and the necessary RBQ exams, visit our section ” Determine the required license (RBQ) “
Architects and engineers, for their part, must hold a valid permit to practice from their professional order.
Targeted work
All construction, renovation or expansion work that adds value to the building gives the right to publish a legal hypothec.
The materials the supply of which gives the right to publish the hypothec are those supplied or prepared to carry out the work indicated above. So simple maintenance work does not usually give rise to a hypothec.
Condition
The legal hypothec arises as soon as the contract is signed or as soon as an agreement relating to the execution of the construction work is concluded, without further formality.
Termination of the contract before the start of the work
The beneficiaries of the legal hypothec who have not concluded a contract directly with the owner of the building, except the worker or the subcontractor, must denounce their contract in writing to the owner, and this before the start of the work. .
It is article 2728 of the Civil Code of Quebec which imposes this compulsory formality in order to subsequently avail oneself of the legal hypothec.
We recommend that you use a denunciation form that meets the requirements of articles 2724 and following of the Civil Code of Quebec.
The notice of termination should therefore be in written form, by registered mail with acknowledgment of receipt, describe the contract awarded, specify the price of the planned work and include a clear explanation of the right to a legal hypothec.
Warning !
You must denounce any modification or additional work carried out which was not provided for in the initial contract. This work will be considered as coming from a new contract and will require additional termination.
Publication of the hypothec after completion of the work
To be valid, the legal construction hypothec must be published to the Registry Office within a mandatory period.
This period is thirty (30) days following the end of the work provided for in the construction project where the beneficiary carried out the work (article 2727 CcQ).
The party issuing a legal hypothec must serve it on the owner by “registered” mail with proof of signature. This letter must be accompanied by a certificate from a lawyer or a notary.
End of the works
The end of the work can only be considered when all the work provided for in the contract (s) have been fully carried out. It is therefore a general end of work and the 30-day period begins only when the last subcontractor has completed his work.
Abandonment of work
The same period of thirty (30) days applies in the event of permanent abandonment of work during the project and which is equivalent to a final shutdown.
Be careful not to confuse ” abandonment “And” suspension “. In the event of suspension, the site is temporarily stopped and therefore does not correspond to the end of the work.
Notice of Exercise of a hypothec Right
Your legal hypothec being registered in accordance with the Registry Office, you have six (6) months to exercise a hypothecary recourse, otherwise, the latter will expire.
After this date, in the absence of notice, there can be no hypothec recourse and the published hypothec can be canceled on request.
To make your hypothec survive beyond this six (6) month period, you must provide notice of exercise to inform the owner of your intention to invoke your guarantee. This notice gives you a period of sixty (60) days to abandon the property voluntarily.
hypothec recourse possible by notice of exercise
- Taking possession for administration
- Taking in payment
- Sale by creditor
- Sale under judicial supervision
To conclude
As a construction contractor, we strongly advise you to master this precious tool that is the Legal Hypothec and which is given to you by the Civil Code of Quebec.
Be aware of the rights that flow from this simple and persuasive legal remedy, which can make the difference between work and materials that will be paid for and others that will not be paid on your future sites.
It is not uncommon to see construction contractors forced to file for bankruptcy due to overdue accounts receivable. ; the legal hypothec remains the best way to protect yourself.
Please note that this subject is addressed when taking the RBQ exams (2017) aimed at obtaining an Entrepreneur’s License and that we prepare you for it adequately in our RBQ training courses.
Annotated Civil Code of Quebec – Article 2727
Obtain your RBQ contractor’s license with an adapted preparation for the RBQ 2017 exams on our easy-to-use study platform, without time constraints, accessible when you want and wherever you are. Possibility of being summoned to RBQ exams quickly.
Obtain your RBQ contractor’s license
0 responses on "The Entrepreneur and the Legal Hypothec"