AN ESSENTIAL TOOL
There is nothing more frustrating and exhausting for a contractor than having to invest time and effort to retrieve money owed following the execution of work. In this regard, and in comparison, the main actors in the construction industry find themselves in a considerably more advantageous position than other professionals in other industries. As a matter of fact, professionals in the construction industry can register a hypothec against the property on which they are performing work. To successfully and efficiently use the protection afforded by law to one’s advantage, understanding the mechanisms of the legal hypothec of construction is necessary.
The legal hypothec of construction exists only in proportion to the work requested by the owner of the building. Nevertheless, the subcontractor doing business with the general contractor is not necessarily so-to-speak “abandoned”. The subcontractor may also register a legal hypothec, provided he sent the owner of the building a written notice of his contract with the general contractor. However, there is one caveat: the said notice needs to be sent by the subcontractor before commencing any work.
Another interesting component of the legal hypothec of construction is that it exists by the mere execution of work, without initially requiring any registration. However, if the procedures for preserving the legal hypothec provided for in the Civil code of Québec are not respected, it will eventually be extinguished by operation of law.
In order to preserve the legal hypothec of construction, it is necessary to register the said hypothec within a delay of thirty (30) days following the completion of work (the notion of the completion of work will be addressed in another article). This is achieved by registering a notice designating the property on which the works were completed and specifying the amount of the claim. The second requirement is to register etiher (i) an action against the owner of the property, or (ii) the prior notice of the exercise of a hypothecary right, the whole within a delay of six (6) months following the completion of work.
In conclusion, the written notice, registration of a notice and of an action (or of a prior notice of the exercise of a hypothecary right) constitute the three main steps that ensure the preservation of the legal hypothec of construction and in so doing, the protection of the contractor’s claim.