Prior notice of exercise of a hypothecary right (Quebec)

In Quebec, a creditor intending to exercise a hypothecary right starts with this notice, subject to the exception in article 2759. Lenders and buyers may meet it when a business is distressed and its assets carry a hypothec. For a federal process see buying assets through a BIA process. See also Quebec hypothec.

What the Civil Code says

Under article 2757, 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 the right will be exercised. Under article 2758, the notice must disclose any failure by the debtor to perform and remind the debtor, where applicable, that the debtor or a third person has the right to remedy the default. Under article 2761, a debtor or other interested person may defeat the exercise by paying the amount owing or remedying the omission or breach set out in the notice and any later one, and in either case paying the costs incurred, before the property is taken in payment or sold, or at any time if the right exercised is taking in possession. Article 2759 lets a creditor holding a hypothec on securities or security entitlements dispose of them without a prior notice, on the conditions it sets.

What to check or ask

• Whether a prior notice is registered against the assets being bought
• What default the notice describes and whether it is remedied
• What release the creditor will give at closing