A legal hypothec published past the deadline can be invalidated, even if the work is not finished. This is highlighted in a recent Québec Superior Court decision that answers a question foremost in the minds of contractors and clients alike: when does contractor abandonment mean the "work is completed" for the purposes of Civil Code of Québec article 2727?
The stakes are high, since the way this concept is interpreted will determine the starting point of the 30 days allowed for publishing a legal hypothec.
Case outline: The facts behind the decision
In May 2023, an owner hired a contractor for a complete renovation of his building. The project went ahead for several months until issues started cropping up: subcontractors claimed they hadn't been paid, and the City sent notice that valid permits had not been obtained, even though the owner had consistently paid the invoices for both the work and permits.
The City issued a stop-work order in February 2024, yet the contractor kept going until April 2024 while continuing to send unclear invoices to the owner. The owner asked for a meeting, to which the contractor replied that he had removed all his equipment from the site and would only return to start up the floor system. However, he never returned.
On June 7, 2024, the contractor published a notice of legal hypothec on the building. Five months later, he sent the owner a notice of hypothecary action.
The Superior Court had to rule on whether the contractor's site abandonment constituted completion of the work under CCQ art. 2727, triggering the 30-day deadline for publishing a legal hypothec.
Court ruling: Contractor abandonment can mark completion of the work... in some cases
In the case at hand, the building still had no running water or heating, as the work clearly had not been finished. Its condition therefore did not fit the basic definition of completed work, i.e., work that has been accepted once the building is functional and habitable.
However, the Court did recognize one exception: when a contractor leaves the site with no intention of returning to finish the work, this can be equated with completion. In this case, the Court noted that the contractor had refused to meet with the owner to clarify his invoices, then left the site with no plans to return even though the work was unfinished.
The Court looked at the situation as it was when the contractor left, that is, what the parties knew and did at the time of abandonment, rather than what happened afterward. There was no reason to believe that the work would eventually resume.
As a result, the abandonment date, that is, the date on which the contractor expressed his intention to stop the work (April 17, 2024), is considered the completion date. From that date, the contractor had 30 days to publish his legal hypothec. Because his hypothec was registered on June 7, 2024, after the deadline, the Court ordered cancellation of the legal hypothec and the prior notice of exercise.
Conclusion
The notion of work completion is open to interpretation based on the facts of the case, which can entail major legal risks for both contractors and clients.
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.
