What is an Immovable Hypothec?
How do you legally define it?
What are the essential elements you should know!
In this article, we will break down the legal definition of Immovable Hypothec so you know all there is to know about it!
Keep reading as we have gathered exactly the information that you need!
Let’s dig into our civil law and hypothec knowledge in Quebec!
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What Is An Immovable Hypothec
An immovable hypothec is a hypothec (or lien) charged against a real estate property, land, or any other real property.
Let’s break down the notion of an immovable hypothec into each of its components.
A “hypothec” is a right registered by one person against an asset that can be a real property or personal property.
Hypothecs can be charged against a real estate property (immovable hypothec) or personal property (movable hypothec).
An “immovable property” is any type of property that is immovable in nature such as a building, land, real estate property, or other similar properties.
In essence, the owner of an immovable property can have the property charged with a hypothec (given as security in the event certain legal obligations are not respected).
The most common form of hypothec granted on immovable properties are known as mortgages.
A mortgage agreement is a contractual agreement between a lender and a borrower whereby the borrower agrees to charge a real estate property (like a home, cottage, residence, building, etc) with a hypothec in favour of the lender in case of non-payment.
If the borrower defaults on payment, the lender can exercise its hypothecary rights on the property.
Immovable Hypothec Legal Definition
In Quebec, the Civil Code of Quebec defines the notion of immovable hypothecs.
Article 2660 CCQ provides the general definition of hypothecs as follows:
A hypothec is a real right on movable or immovable property made liable for the performance of an obligation.
In other words, a hypothec is a right granted on a real estate property or personal property intended to secure the performance of an obligation.
Article 2665 CCQ states that a movable hypothec can be with our without delivery:
A hypothec is movable or immovable depending on whether it charges movable or immovable property or a universality of movable or immovable property.
In essence, a hypothec is considered “immovable” if it charges an “immovable property” or a “universality of immovable property”.
Immovable Hypothecs by Notarial Deed
To create a hypothec over an immovable property such as land or a building, the owner of the immovable property must grant it to the creditor in writing by way of notarial deed.
Considering the important consequence of granting a lien on land or building, the Quebec law requires strict procedures to be followed to ensure debtors fully understand what they are doing.
A notary in Quebec will typically draft the deed of hypothec, explain the content of the deed to the borrower (or debtor), and have the person sign.
The notarial deed must clearly identify the real estate property or land being charged along with the amount for which the hypothec is being granted.
For example, if a person owns a home worth $400,000 that is fully paid off, he or she can borrow say $200,000 at the bank and grant a hypothec of $200,000 to cover the amount of the loan.
In practice, the banks will generally charge the property with 20% more to cover interest and other costs.
In our example, for a $200,000 loan, the bank may charge a hypothec of $240,000 representing 20% more than the actual loan value.
Publication of Immovable Hypothecs
The publication of the hypothec is very important to protect the creditor’s rights.
When a creditor signs a notarial deed of hypothec with a borrower, the contract is private and legally binding on the creditor and the borrower.
Third parties or the world does not know that the creditor has a hypothec against the property.
Once the hypothec is published in the land registry in Quebec, then the world will know that the specific creditor has rights published against the property.
The publication of the hypothec allows the creditor to:
- Exercise rights against the property no matter who owns the property (the right follows the property)
- Receive liquidation proceeds in priority before other creditors or the property owner
Creditors are careful to ensure that their hypothec is duly registered and published against a property before disbursing loans and financing the acquisition of real estate properties, lands, and buildings.
Immovable Hypothec Quebec Takeaways
So what is the legal definition of an Immovable Hypothec?
Let’s look at a summary of our findings.
Immovable Hypothec Meaning
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