Construction Hypothec


October 25, 2016 Debt Recovery

This article outlines several basic key concepts of construction hypothecs.

A contractor, sub-contractor, architect, engineer, or workman can, if they remain unpaid, publish a construction hypothec on the immovable on which they worked, whether for its construction or renovation.

The suppliers of the materials used for the work are also granted the same right.

This article outlines several basic key concepts of construction hypothecs:

  1. In order to be entitled to a construction hypothec, the creditor must have taken part in the construction or renovation work on the immovable and said work must bring an added value to the immovable (regular maintenance or repair work do not give rise to this right);
  2. Only said added value (generally the value of the work and materials provided) will be guaranteed by a construction hypothec;
  3. A construction hypothec will rank above all other published hypothecs on the immovable;
  4. If the contract is not granted to him directly from the immovable’s owner, the contractor or supplier of materials must inform the immovable’s owner of his contract in writing before carrying out the work, and only the work performed or materials supplied after such information is provided may be subject to a hypothec notice;
  5. An unpaid contractor or supplier has up to 30 days from the end of the work to publish his construction hypothec. This is the mandatory time period for publication and any construction hypothec published after this period will be invalid. The “end of the work” refers to the end of the all the work planned for the site for this project;
  6. The work is considered ti have ended:
    (i) when the work has been fully completed in accordance with the plans and specifications,
    (ii) when the work has been abandoned, or
    (iii) in the absence of plans and specifications, when the immovable may be used for the purpose for which it is intended;
  7. The fact that the immovable is sold to a third party or that the immovable’s owner goes bankrupt does not impact a right to a construction hypothec, provided the individual entitled to said right published it within the period stipulated in the law; and
  8. To protect themselves against construction hypothecs, buyers and/or hypothecary creditors can subscribe to real estate title insurance.

While appearing simple, the rules regarding construction hypothecs are numerous and can be complex, not to mention the various time periods within which one must act. The help of a lawyer specializing in real estate and construction law is essentially for clearly understanding the law and acting accordingly.

This bulletin provides general comments on recent developments in the law. It does not constitute and should not viewed as legal advice. No legal action should be taken on the basis of the information contained herein.

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