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Movable Hypothec In Quebec (Meaning: All You Need To Know)

What is a Movable Hypothec?

How do you legally define it?

What are the essential elements you should know!

Keep reading as we have gathered exactly the information that you need!

Let’s dig into our civil law and hypothec knowledge in Quebec!

Are you ready?

Let’s get started!

What Is A Movable Hypothec

A movable hypothec is a hypothec (or lien) charged against personal property or equipment.

Let’s break down the notion of movable hypothec into each of its components.

A “hypothec” is a right registered by one person against an asset that can be real property or personal property.

Hypothecs can be charged against a real estate property (immovable hypothec) or personal property (movable hypothec).

A “movable property” is any type of personal property that can be owned and does not fall under the category of real property or immovable.

Personal property can include things like:

  • Equipment 
  • Tools
  • Furniture 
  • Account receivables
  • Investments 
  • Inventory 
  • Collectibles 

In essence, the owner of any movable property can have the property charged with a hypothec (given as security in the event certain legal obligations are not respected).

Movable Hypothec Legal Definition

In Quebec, the Civil Code of Quebec defines the notion of movable 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.
Author

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 movable hypothec may be created with or without delivery of the movable hypothecated. Where it is created with delivery, it may also be called a pledge.
Author

In essence, when the property is given to the creditor, that is considered a hypothec or a pledge.

Alternatively, the debtor can retain the possession of the property charged with the hypothec as well (that’s a case where the hypothec is without delivery).

Movable Hypothec With Delivery

When a movable property is charged with a hypothec and delivered, we refer to that as a “pledge”.

Let’s take an example to illustrate the point.

Imagine that John wants to borrow $1,000 from a private investor.

The private investor tells John that she is ready to lend him $1,000 provided John gives her a hypothec on his watch.

When John gives his watch to the private investor, the hypothec is created as John (debtor) delivered the watch (movable property) to the private investor (creditor).

Publication of Movable Hypothecs

In Quebec, a movable hypothec can be published to notify the public that a certain property has been charged with a hypothec.

The objective of the publication is to let the world know that a creditor has charged a movable asset with a hypothec and may exercise rights against that property in the event the debtor fails to comply with its legal obligations.

The publication of a hypothec will allow the creditor to:

  • Exercise its rights against the property even if the property is sold by the debtor to a third party
  • Obtain preference in getting paid when the property is sold 

Let’s take an example.

Imagine John purchases a car where he finances the purchase through his bank.

In this case, the bank will register and publish a movable hypothec against John’s automobile.

If John sells the car to Mary, the bank will remain a hypothecary creditor on the car and may exercise its rights against the car even though it’s now owned by Mary.

Also, in another scenario, image that John does not pay for his car payments.

In that case, the bank can exercise its rights on the car and have the car sold.

From the proceeds of the sale, the bank can preferentially get paid the money and sums it is owned by John.

In Quebec, companies, businesses, banks, and individuals can publish their movable hyothecs with the Register of Personal and Movable Real Rights (RPMRR) (known as “Regitre des drois personnels et réels mobiliers” or “RDPRM”)

Movable Hypothec Quebec Takeaways 

So what is the legal definition of a Movable Hypothec?

Let’s look at a summary of our findings.

Movable Hypothec Meaning

  • A “movable hypothec” is a type of hypothec that is charged against a movable property 
  • A movable property is any personal property that is not land, building, real estate, or immovable 
  • A “movable” hypothec can be created either with or without delivery of the property charged (when there is delivery, the debtor delivers the charged property to the creditor)
  • Creditors benefit by publishing a hypothec against a movable asset as they can not only have priority in getting paid when the asset is sold or liquidated but also they can also ensure that they follow the property even if it’s sold by the debtor 
  • To publish a hypothec, a creditor must do so with the Quebec Register of Personal and Movable Real Rights
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