Unpaid receivables are common in the construction industry. Different construction workers may have difficulty getting an invoice paid by a customer, and the work is often already done when the problem occurs.

This is why the construction legal hypothec mechanism was created by Quebec law. It allows general and specialized contractors, as well as workers, architects, engineers and material suppliers, to register a hypothec as soon as a debt is unpaid for construction, renovation or expansion work that adds value to an immovable. This hypothec even has priority over other conventional hypothecs, such as those of financial institutions. Ultimately, a legal hypothec allows the beneficiary to have the immovable sold in court and keep the amount equivalent to his unpaid debt.

In order for the remedy to be available, those entitled to it must comply with certain formal requirements. For example, those who do not contract directly with the owner of the immovable, such as subcontractors who agree with the general contractor, must send a written notice to the owner to inform him of the existence of their contract. Without this notice, these subcontractors are not entitled to a legal hypothec. Those who have contracted directly with the owner do not have to complete this formality. The legal hypothec is automatically created in their favour when they do not receive payment for the work done.

This is only one of the formalities to be completed to ensure that you retain your right to a legal hypothec. Several other steps must be completed and deadlines apply! Contact us for more information about your situation. All construction workers should be well counselled on legal hypothecs.