Exercising Mortgage Rights in Quebec | Creditor Remedies

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The exercise of hypothecary rights in Quebec is governed by articles 2748 to 2794 of the Civil Code of Quebec. When a debtor defaults on obligations, the hypothecary creditor must follow a rigorous procedure before exercising remedies. The process begins with a prior notice of the exercise of a hypothecary right, which must be served on the debtor and published at the Land Register. The period is 60 days for residential immovables (art. 2758 C.C.Q.) and 20 days for movable property. During this period, the debtor may remedy the default by paying arrears and costs incurred. Available remedies include taking in payment (giving in payment), where the creditor becomes the property owner, sale by judicial authority, sale by the creditor and taking possession for purposes of administration. The choice of remedy depends on the circumstances and the creditor's strategy. Mortgage brokers play an important role in informing borrowers about these mechanisms before the contract is signed.

Procedure for Exercising Hypothecary Rights

When a borrower defaults on mortgage obligations in Quebec, the creditor cannot simply seize the property. The Civil Code of Quebec (art. 2748-2794) imposes a strict procedure designed to protect the debtor's rights while allowing the creditor to recover the debt. This procedure is different from the foreclosure practised in common law provinces.

The Prior Notice of Exercise

The process begins with serving a prior notice of the exercise of a hypothecary right on the debtor. This notice must indicate the nature of the default, the amount claimed and the remedy the creditor intends to exercise. It must be published at the Land Register. The period is 60 days for an immovable serving as a principal residence (art. 2758 C.C.Q.), thereby providing significant protection to the borrower.

The Hypothecary Creditor's Remedies

Taking in payment: The creditor becomes the property owner, but the debt is entirely extinguished, even if the property value is less than the balance owed (art. 2778-2783 C.C.Q.).
Sale by judicial authority: The court supervises the sale to ensure a fair price and protect the rights of all parties (art. 2791 C.C.Q.).
Sale by the creditor: The creditor sells the property themselves, usually at auction, acting in good faith to obtain the best possible price (art. 2784-2790 C.C.Q.).
Taking possession for administration: The creditor takes possession of the property to manage it and collect income, without becoming its owner (art. 2773-2777 C.C.Q.).

Role of the Mortgage Broker

The AMF-certified mortgage broker has an ethical obligation to inform clients of the consequences of payment default and the creditor's available remedies. This information must be communicated clearly before the mortgage contract is signed. If a client experiences financial difficulty, the broker can also act as a facilitator by directing the borrower toward restructuring or refinancing solutions.

Frequently Asked Questions

What is the notice period before mortgage foreclosure in Quebec?

The prior notice period is 60 days for residential immovables (art. 2758 C.C.Q.) and 20 days for movable property. This notice must be served on the debtor and published at the Land Register. During this period, the debtor may remedy the default by paying arrears and costs.

What is taking in payment?

Taking in payment (art. 2778-2783 C.C.Q.) allows the hypothecary creditor to become owner of the property in lieu of payment of the debt. It is a remedy specific to Quebec civil law. The creditor who exercises taking in payment extinguishes the debt; they cannot claim a residual balance from the debtor.

Can the debtor stop the foreclosure process?

Yes, during the prior notice period (60 days for an immovable), the debtor may remedy the default by paying arrears, interest and reasonable costs incurred by the creditor. The debtor may also apply to the court to contest the remedy if the legal conditions are not met.

What is the difference between sale by judicial authority and sale by the creditor?

Sale by judicial authority is supervised by the court, which determines the conditions of sale to protect the rights of all parties. Sale by the creditor is carried out directly by the creditor, usually at auction. The creditor must act in good faith and obtain a price reasonably corresponding to the market value of the property.

Can the creditor claim a balance after sale of the property?

In case of a sale (by judicial authority or by the creditor), if the sale proceeds are insufficient to cover the debt, the creditor may claim the residual balance from the debtor. However, in taking in payment, the debt is extinguished entirely, even if the property value is less than the balance owed.