A creditor who holds a contractual mortgage (hypothec) on an immovable property to guarantee the repayment of a debt may, in the event of a default by the debtor, consider exercising one or more of the following remedies under certain circumstances: taking possession of the property for temporary administration purposes; taking in payment of the property; the sale of the property by the unpaid creditor; or the sale of the property under judicial authority.
Taking Possession for Administration
Regarding the remedy of taking possession for administration purposes, it is only available to a creditor if the mortgage affects the property of an enterprise, such as an office building or a shopping centre. Furthermore, taking possession for administration is distinct from taking in payment because the creditor does not become the owner of the property by exercising this remedy, but only its temporary administrator.
Taking in Payment
The remedy of taking in payment requires the mortgage creditor to obtain court authorization if less than half of the mortgage debt is unpaid at the time that the prior notice of the exercise of a hypothecary right is registered in the Quebec Land Registry. This taking in payment—finalized by a court judgment of forced surrender or a deed of voluntary surrender of the property—has the effect of extinguishing the unpaid debt that was secured by the mortgage.
By exercising the remedy of taking in payment, the creditor ultimately becomes the owner of the property effective from the date that the prior notice of the exercise of the hypothecary right was registered in the Quebec Land Registry. The property is acquired free of all mortgages published in the Quebec Land Registry later than their own, and real rights created after the registration of the prior notice cannot be set up against them.
Sale Remedies
- Sale by the Creditor: The remedy of a sale of the mortgaged property by the creditor exists when the mortgage affects the property of an enterprise. The immovable must then be sold for a commercially reasonable price and without undue delay.
- Sale Under Judicial Authority: For the remedy of a sale under judicial authority, the sale of the mortgaged property must take place through a person designated by the Court and pursuant to the conditions fixed by the Court.
To learn more about the mortgage remedies related to a contractual immovable mortgage, do not hesitate to consult your lawyer.
