Construction legal hypothecs

Construction legal hypothecs

You have concluded a contract for the construction of the house of your dreams. At first, everything is going well until one day, when you check on the construction, you realise major mistakes have been made. You had signed for red bricks, they put grey ones which not only are aesthetic, but also more expensive. Angered, you decide you will not pay the last bill. The construction company replies by publishing a construction legal hypothec and afterwards, a prior notice of the exercise of a hypothecary right. What does this mean for you and how can you resolve the situation?

A construction legal hypothec will show on the land register and will be an obstacle when you will try to sell your house or when you will ask for another hypothec. It is therefore very important to cancel it as soon as possible by paying the amount you owe (if it is the case) or by making a defense and counterclaim in answer to the motion to introduce proceedings which will be sent by the construction company.

The construction legal hypothec will be valid or not depending on how it is registered.

The persons
Article 2726 C.C.Q. states that the only persons who can publish a construction legal hypothec are the architect, engineer, supplier of materials, workman and contractor or sub-contractor having taken part in the construction of the work requested by the owner or who supplied the materials or services for the work.

When they are sub-contractors, that is, persons who did not have a direct contract with the owner, they must make a written declaration of the contract to the owner as stated in article 2728 C.C.Q. If they do not, they will not be able to publish a hypothec. This restriction does not apply to workmen.

Also, if the repairs or construction were not requested by the owner, no one will be able to publish a construction legal hypothec on his immovable.

The amounts
Article 2728 C.C.Q. explain that the construction legal hypothec only secures the increase in value added to the immovable by the work. Therefore, if you add a solarium for 5 000.00 $ and it only increases the value of your immovable by 3 000.00 $, the construction legal hypothec will be to the amount of 3 000.00 $ only. Of course, the constructor will still have a recourse against you for the rest.

The delay

The hypothec subsist if a notice describing the charged immovable and indicating the amount of the claim is registered within 30 days after the work has been completed.

After the registration, the hypothec will be extinguished six months after the work is completed unless the creditor publishes an action against the owner or registers a prior notice of the exercise of a hypothecary right.

The notion of « being completed »
The work is completed only once, no matter how many workmen you have and no matter the type of work. Therefore, if you do repairs to your walls and windows, the walls being completed on March 13th and the windows being completed on March 20th, the work will be completed on March 20th.

For example, in Bertrand Spénard c. 3102-7725 Québec Inc.(1), a couple had bought kitchen cupboards. However, the company did not deliver the right ones. They did not want to change them, arguing they had delivered the right type. In the end, the couple decided to do business with another company and never paid the firsts cupboards. A construction legal hypothec was registered and the couple argued that it had been done too late, more than 30 days after the work was completed. The judge decided that since the firsts cupboards were never installed but the couple had not abandoned the project, the work had been suspended and not completed. The work was therefore completed when new cupboards were installed and the hypothec was registered within the delay.

The rank

As stated in article 2952 C.C.Q., construction legal hypothecs are ranked before any other published hypothec, for increase in value added to the immovable. If there is more than one construction legal hypothec, they rank concurrently among themselves, in proportion to the value of each claim.

These informations can give you an idea of the validity of a construction legal hypothec. However, this subject is still very complex and every case is unique. When in doubt, it is better to consult a lawyer.

(1) 2012 QCCQ 112, (CanLII)

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