You wonder what is a Legal Hypothec in Quebec? When buying a condo, each co-owner becomes the owner of a fraction and property rights according to their share. In return, they become liable for their share of the common expenses.
However, some co-owners sometimes fail to pay their calls for funds, requiring the condominium to take forced recovery measures and guarantee the payment of the amounts due. Section 2729 of the Civil Code of Québec allows the syndicate to protect its claim toward the land co-owner in default by registering a legal hypothec (or legal mortgage).
What is the Legal Hypothec definition?
Article 2726 of the Quebec Civil Code (« C.c.Q. ») establishes that the Legal Hypothec guarantees any added value that was added as a result of the labour, supplies or services provided by the persons having taken part in the construction or renovation of an immovable.
According to this, a legal construction hypothec is granted as a security (no publication required for it to exist) to architect, engineer, suppliers of materials, workers and contractors when working on buildings or any construction project.
Guarantees the payment of the amounts due
An undivided co-ownership is entitled to take out a legal hypothec on the condominium fraction of a co-owner who has not paid the amounts that they owe to the syndicate as defined in the contract. This approach aims to protect the claim of the syndicate of co-owners, which then takes precedence.
The firm that handles the condominium management can even put the condo up for sale or take possession of it for administrative purposes. Without going that far, the co property owner is likely to suffer other damages related to the presence of this legal hypothec. Its removal may be required:
- by the financial institution financing the property, claiming that it constitutes a cause of default in payment on the mortgage.
- by a potential buyer of the condo to protect the title deeds from any claim.
Penalties and fines are not common expenses
The advantage legal mortgage (hypothec) can be used by the syndicate of co-owners only for certain claims:
- the payment of the amounts due with respect to the common expenses;
- in particular, special contributions;
- as well as calls under the contingency fund.
It should be noted that any amounts that may be due as penalties or fines for non-compliance with a provision of the declaration of co-ownership are not considered to be common expenses.
How does a legal hypothec work?
Once the co-owner in default is more than 30 days late paying their share of the common expenses or the contingency fund, the syndicate may register a syndicated mortgage (hypothec), as a legal action, against their fraction.
The legal hypothec protects up to three years of expenses
The hypothec not only covers the amounts payable as of the date of registration, but also:
- the charge costs and claims for the current financial year;
- those of the following two years.
The registration is carried out at the Bureau de la publicité des droits
The syndicate of co-owners must register the notice of legal hypothec at the Bureau de la publicité des droits. This must indicate:
- the nature of the claim;
- the total payable as of the date of registration;
- the expected amount of the charges and claims for the current year and those for the following two financial years.
The amount of the syndicate’s hypothec may therefore change after it has been registered.
The expiry and removal of the legal hypothec
The syndicate of co-owners may sign a voluntary deregistration act if the co building owner fulfills their payment obligation. In the event that no action is taken after registration, the legal mortgage automatically expires three years after its registration.
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As condo property managers in Montréal for more than 35 years, we offer a wide variety of services from financial and administrative to building maintenance management. Please note that this article does not constitute legal advice. Our team is at your disposal for any question about your condo properties, reach us at any moment!