Legal Construction Hypothecs.
Legal construction hypothecs protect the entitlement of contractors, suppliers, architects and engineers to be paid.
The legal construction hypothec (akin to a builder’s, mechanic’s or construction lien in common law jurisdictions) is a charge that can be registered against the lands that are being improved by an unpaid contractor, subcontractor, manual worker, architect or engineer to secure amounts properly owing to them. The construction hypothec is a powerful security since it outranks conventional hypothecs (i.e. mortgages). Although the construction hypothec is a relatively simple mechanism to secure payment, it is subject to a number of formalities with respect to its creation and its enforcement.
Most importantly, subcontractors, subconsultants and suppliers who do not deal directly with an owner must send a preliminary notice to an owner before providing their work or services in order to protect their right to claim a construction hypothec. In turn, an owner who is so alerted can take steps to protect himself against the possible registration of construction hypothecs (liens) by unpaid subtrades and subconsultants.
Quebec stands apart from other Canadian provinces in that it has no specific lien legislation (other than relevant provisions of the Civil Code of Québec), no statutory construction trust system and no prompt payment and adjudication legislation, either enacted or pending. As a consequence, the security afforded by a construction hypothec plays a pivotal role in the Quebec construction scene.
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