Mortgage Publication: Making the Security Enforceable Against Third Parties
Signing the mortgage deed at the notary's office is only the first step in constituting a valid mortgage. For the security to be fully effective, it must be published in the Quebec Land Registry. Publication, governed by articles 2934 to 2940 of the Civil Code of Quebec (CCQ), is the mechanism that makes the mortgage enforceable against third parties — meaning invocable against anyone other than the contracting parties.
The Quebec Land Registry
The Land Registry is a public registry maintained by the Registry Office, a body under Quebec's Ministry of Justice. It contains the history of all rights registered against every property in the province: mortgages, servitudes, rights of way, long-term leases, and other charges. The registry is organized by lots (cadastral numbers) and is accessible online. This transparency allows any potential purchaser or creditor to verify the state of rights over a property before proceeding with a transaction.
The Right to Follow: Following the Property Into All Hands
The right to follow is one of the most powerful attributes of a published mortgage. Provided for in article 2660 of the CCQ, it allows the hypothecary creditor to follow the encumbered property into the hands of any subsequent purchaser. Concretely, if a borrower sells their property without repaying the mortgage, the creditor retains the right over the property. The new owner then acquires a property encumbered by a mortgage and could face the creditor's remedies if the debt is not repaid. This is why the notary systematically searches the Land Registry before any real estate transaction.
- Right to Follow
- An attribute of the hypothecary real right that allows the creditor to follow the encumbered property into the hands of any subsequent holder, regardless of transfers of ownership. This right is conditional on publication of the mortgage in the Land Registry (art. 2660 and 2941 CCQ).
The Right of Preference: Priority Among Creditors
The right of preference, also provided for in article 2660 of the CCQ, grants the published hypothecary creditor priority of payment when the security is realized. If the property is sold under judicial authority, the sale proceeds are distributed according to hypothecary ranking order. The first-ranking creditor is paid first, then the second-ranking creditor, and so on. Ordinary (unsecured) creditors are paid only after all hypothecary creditors have been satisfied. This mechanism explains why lenders attach great importance to the rank of their mortgage.
- Right of Preference
- An attribute of the hypothecary real right that grants the published creditor priority of payment over ordinary creditors and lower-ranking creditors when the proceeds from the sale of the property are distributed. Rank is determined by the date of publication in the Land Registry (art. 2945 CCQ).
The Publication Process
- Signing the mortgage deed: The borrower and lender (or their representatives) sign the mortgage deed before the instrumenting notary.
- Application for registration: The notary prepares and submits an application for registration to the Registry Office. This document requests the registration of the mortgage in the Land Registry.
- Review by the registrar: The registrar verifies that the application meets legal requirements and proceeds with registration if everything is in order.
- Registration in the registry: The mortgage is registered in the Land Registry with a specific date and time. This date determines the mortgage's rank relative to other securities registered against the same property.
- Confirmation of publication: The notary receives confirmation of the registration and transmits it to the lender, who now holds a published mortgage enforceable against third parties.
Impact on Refinancing and Renewal
Publication plays a determining role in refinancing or switching lenders. When a borrower changes lenders, the former lender's mortgage must be discharged and a new mortgage must be published in favour of the new lender. This operation generates additional notary and publication fees. Some lenders accept mortgage assignment, which allows the existing mortgage to be transferred to the new lender without discharging and publishing a new one, thereby reducing costs. OSFI requires federally regulated lenders to hold a first-rank mortgage for conventional loans, which influences the options available when refinancing.