As a result, Quebec mortgages can now secure the same obligations as those in general security agreements granted elsewhere in Canada. It is no longer necessary to issue a loan and then mortgage the loan, a practice that was designed to meet the conditions of the original section 2692 of the CCQ, which holds guarantees in favour of the person who holds the power of the creditors of a debt title such as a loan (the “power of the creditors”). This structure remains available despite the introduction of the amendment to the legislation and no changes to the existing security are necessary. The amendments to section 2692 of the CCQ will make it much easier to take charge of security in Quebec because of the need for a heavy structure. Clarification on the role and powers of the Mortgage MP is also beneficial. DISCLAIMER: This publication aims to provide general information on legal issues and developments from the date indicated. It does not constitute legal advice and cannot be treated or used as such. Please read our complete exclusion from liability under www.stikeman.com/legal-notice. The legislative amendments that came into effect on April 21, 2015 will expand the scope of obligations that can be secured by a mortgage granted under section 2692 of the CCQ to include any obligation of a corporation (agency), corporation (restricted or general partnership) or agent. This assumption is no longer limited to guaranteeing the payment of bonds or other debt issued by a trustee, a limited partnership or a corporation. In practice, a Quebec Hypothec can now be granted for the benefit of a representative of one or more creditors in order to guarantee any obligation (except that of an individual). The “power base of all creditors” or his English counterpart, the hypothetical representative, acts for all current and future creditors of all obligations guaranteed by a hypothec granted under section 2692 of the CCQ.
This revised provision defines the powers and role of the mortgage member, who is described as the “owner of the hypothesis” and able to engage creditors in the exercise of his or her powers vis-à-vis third parties. Generally speaking, a guarantee representative appointed in accordance with the provisions of a credit contract will act as a hypothetical representative within the limits of its powers and obligations. The amended provisions of the CCQ now concern the appointment and replacement of the Mortgage Member, but it is clear that the parties have the flexibility to enter into contractual agreements governing the appointment and replacement provisions.