Nearly 2 weeks ago, the Quebec government ordered the closure of construction sites due to the COVID-19 pandemic. Some believe that the closure of construction sites could have a negative effect on the volume of work being done by workers, as some promoters may cancel construction projects. The purpose of this article is to provide a reminder of the terms and conditions surrounding construction legal hypothecs at the time of the COVID-19 pandemic.
A legal construction mortgage allows people who have participated in the construction or renovation of an immovable to publish a mortgage to guarantee the increase in value of the immovable as a result of the work they have carried out [1]. This mortgage remains in effect for the first 30 days following completion of the work. To retain it, a notice of legal construction mortgage must be published in the land register within this period.
Completion of work
Completion of the work is defined as “the moment when the building is ready, with all that the full performance of the contract entails, for the use for which it is intended” [2]. This means there is only one end to the work for the entire construction or renovation project.
However, it is still possible to publish a notice of legal hypothec before the work is completed. For example, a formwork subcontractor could publish a notice after his own foundation work has been completed, when there is still a lot of work to be done on the building (plumbing, electricity, framing, roofing, etc.) before the end of the work.
Suspension or abandonment of work
On March 23, the Quebec government ordered the closure of construction sites deemed non-essential due to the COVID-19 pandemic. Determining the end of work is of great importance for the preservation of legal mortgage rights.
The difference between suspending work and abandoning it lies in the owner’s intention. Suspension of work results in postponement of completion [3], while abandonment constitutes completion of the work. On the other hand, suspension followed by abandonment may be considered as completion of the work. The question is to determine the point at which the resumption of work ceases to be foreseeable [4]. If the resumption of work remains foreseeable, this implies that the work has simply been suspended [5]. Determining whether work has been suspended or abandoned is a question of fact that depends on the weight of the evidence and the credibility of the witnesses [6].
Despite publication of the legal construction mortgage within the 30-day period, the mortgage is automatically extinguished 6 months after completion of the work, unless (1) the mortgagee publishes an action against the owner of the building or (2) the mortgagee registers a notice of exercise of a mortgage right.
Developers may wish to maintain good communication with their general contractor, and possibly their subcontractors, to reassure them that the worksite is only suspended, and that work will resume as soon as the situation caused by COVID-19 allows.
Contractors and subcontractors who are uncertain as to when work will resume can consult a legal expert to determine their rights and remedies.
[1] Civil Code of Québec, articles 2726, 2727, 2728.
[2] Placements Maléjo Inc. v. Constructions Richard Lavoie et Associés Inc, J. E. 2012-276 (S.C.)
[3] Placements SCP inc (Receiver of) and Lemieux Nolet inc, 2015 QCCS 6021.
[4] Groupe Drumco Construction inc. c. Revis Real Estate 2018 QCCS 378
[5] Nova Construction plus (JPR) inc. v. Hypothèque CIBC inc. 2006 QCCA 1017.
[6] Placements SCP inc (Receiver of) and Lemieux Nolet inc, 2015 QCCS 6021.
