Let’s try to demystify the famous prior notice of exercise.
First and foremost, it is the first mandatory step in the exercise by a creditor of his hypothecary rights and remedies, in the event of a default by the debtor or following the expiry of the previously agreed term.
The prior notice of exercise is required for any creditor whether he holds a conventional or legal hypothec.
Article 2757 of the Civil Code of Quebec provides that:
“A creditor intending to exercise a hypothecary right must file a prior notice at the registry office, together with evidence that it has been served on the debtor and, where applicable, on the grantor and on any other person against whom he intends to exercise his right.
The registration of the notice must be notified in accordance with the Book on Publication of Rights.”
Therefore, in case of default or at the end of the term, the unpaid creditor must signify his intention to undertake a hypothecary recourse, thus leaving the debtor the opportunity to correct the defaults or refinance his property, if necessary.
In real estate matters, the notice period must be 60 days. In the case of movable property, the notice period must be 20 days.
The question I am most often asked is: What happens at the end of the 60-day period?
In fact, on the 61st day and the following days, the immovable will remain in its place and the debtor will retain possession of it, unless there is an exception and a court judgment to the contrary.
However, the creditor will then be in a position to take legal recourse to exercise the hypothecary right mentioned in the notice, i.e. the taking in payment, the sale by the creditor or the sale under court supervision.
It is also possible that the creditor may decide to request possession for administrative purposes.
Therefore, a judgment will have to be obtained, following a legal recourse to which the debtor will have the opportunity to present his defences, if any.
Unfortunately, the publication of a notice of exercise generally has a negative impact on the debtor’s credit score, much like the registration of a legal hypothec.
For more information, do not hesitate to consult us.