Legal Hypothecs in Quebec (Legal Mortgages)
What is a legal mortgage?
A legal mortgage is a protective measure that a creditor can use when a debt is not paid. In Quebec, it is registered directly in the land registry, making it public and accessible to everyone. In other words, it is a charge registered on your property to guarantee the repayment of a debt. This registration does not automatically mean that you will lose your home. However, it does greatly complicate your financial plans. A mortgage creditor may refuse to renew your loan or authorize refinancing, even if your payments are up to date. This can have a domino effect: inability to consolidate your debts, resorting to more expensive private loans, and deterioration of your credit rating.
The four types of legal mortgages recognized in Quebec are:
- Legal mortgage of the State: for tax or municipal debts, such as property taxes or school taxes.
- Legal construction mortgage: when contractors, workers, or suppliers have not been paid for work.
- Legal mortgage of the condominium owners’ association: if you do not pay your condo fees, the association can register a legal mortgage on your unit.
- Legal mortgage resulting from a judgment: when a court orders repayment, for example for alimony or a contractual debt.
Regardless of the type, a legal mortgage is detrimental.
How does the process work?
The registration of a legal mortgage follows a specific process governed by law.
- Prior notice: Before registration, the creditor must send you formal notice of their intention.
- Registration in the land registry: The mortgage is then made public. Anyone who consults the title to your property will see this encumbrance.
- Notification of lenders: Your banks and mortgage lenders are notified. Several institutions regularly consult the registry to protect their interests.
- Immediate impact: Even if you continue to make your regular payments, the presence of this charge may cause the bank to refuse refinancing or not renew your mortgage at the end of the contract.
In some cases, a legal mortgage is followed by a judgment, which is recorded in your credit file and remains there for 6 to 7 years. This reduces your borrowing capacity, even if you otherwise have a good income and a good banking history.
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