Canada: A Client Asked Us: Preserving Hypothecary Rights In Québec Following A Grantor's Asset Sale Completed Without Consent

Last Updated: October 5 2017
Article by Larisa Albu and Marie-France Béland

Q: When a grantor of a movable hypothec alienates[1] certain of its assets, is there a formality that must be completed by the secured party in order to preserve its rights?

A: In Québec, a hypothec is a real right over the hypothecated property. The hypothec grants to the secured party the right to follow the hypothecated property even if, following the execution of the hypothec, such property falls in the possession or ownership of a third party. Therefore, when a secured party is informed that the grantor of a movable hypothec is selling or assigning to a third party certain assets subject to the movable hypothec granted in its favour, the secured party must complete certain verifications and formalities in order to preserve its rights and rank under the movable hypothec. First, the secured party must determine the type of hypothec it holds (i.e. universal or specific hypothec) and second, it must determine if the hypothecated property is or has been alienated in the grantor's ordinary course of business.

A hypothec that charges a universality of movable property alienated in the ordinary course of business subsists but attaches to property of the same nature which replaces the alienated property, without any additional formality on behalf of the secured party.

A hypothec that charges an individual property alienated in the ordinary course of business subsists but attaches to the property that replaces it by the registration of a notice identifying the new property. If no property replaces the alienated property, the hypothec subsists but attaches only to the proceeds of the alienation, provided they can be identified[2] (for instance, if the money is held in a separate bank account).

Subject to the exception explained in the next paragraph, if the hypothecated property is not alienated in the ordinary course of business, the secured party preserves its rights pursuant to the movable hypothec by filing, under the name of the acquirer, a notice of preservation of hypothec in the Register of Personal and Movable Real Rights ("RPMRR"), regardless if the hypothec charges a universality of property or certain and determinate property. Such notice must be registered within 15 days after the secured party is informed in writing of the transfer of the hypothecated property and the name of the acquirer, or after the secured party consents in writing to the transfer. There are no specific formalities required with regards to the notice that must be sent to the secured party. The question of when the secured party has been informed in writing of the transfer of hypothecated property is a question of fact. The secured party must transmit a copy of the notice to the acquirer within the same 15 day timeframe. The notice must indicate the name of the grantor of the hypothec, the name of the acquirer of the hypothecated property and the description of the hypothecated property[3]. Registering a notice pursuant to Section 2700 of the Civil Code of Québec under the acquirer's name allows a third-party to take note of the existence of the secured party's hypothec, and therefore renders it enforceable against any third party.

If the hypothecated property falls under specific categories of property at the time of the registration of the hypothec, such as road vehicles to which a Vehicle Identification Number (VIN) has been assigned, a specific file is created at the RPMRR under the VIN number in addition to the registration under the grantor's name. If such file is created, a notice of preservation is not required regardless if the property is alienated in the ordinary course of business or not.

It is important to mention that the general intention of the legislation is to limit a secured party's right to follow hypothecated property. Such intention is motivated by concerns for the stability of third party rights. Therefore, in some cases, some formalities, including those mentioned above, are necessary in order for the secured party to preserve its rights to the hypothecated property against third parties.

Consequently, under Québec law, the formalities to be completed regarding the preservation of the secured party's rights under a movable hypothec depend of the nature of the hypothec (i.e. universal or specific hypothec) and on whether the hypothecated property is alienated in the ordinary course of the grantor's business. However, the secured party should be aware that certain formalities must be completed in Québec as soon as it is informed in writing of the alienation of certain hypothecated property in order to preserve its rights.


[1] Alienation includes the sale of the hypothecated property, the assignment of a hypothecary claim, exchange or assignment of a property right, etc.

[2] Civil Code of Québec, R.S.Q., c. C-1991, article 2674.

[3] Ibid, article 2700.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions