You probably read on Wednesday on these pages the matter of this couple sued for $100,000 for a legal mortgage on their condominium. How do you protect yourself from such a situation?
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Before we begin, what is a legal mortgage? It is a mechanism under the Civil Code which allows to protect suppliers and contractors who participated in the construction of a building. When a supplier or subcontractor cannot get paid, he has 30 days after the end of a project to publish a notice of legal hypothecation.
The originator of a legal mortgage must be paid first on sale of the joint property, before the mortgage institution. Such a mortgage complicates the lives of the co-owners in a special way. A lender can revoke their mortgage, an insurance company can refuse to cover the property, it is very difficult to resell the apartment.
Especially since it can take months to contest such a mortgage in court. It is all the more serious as the writer of a legal mortgage can force a legal sale to hope to be paid.
“For decades, this issue of legal mortgages has represented real Russian roulette for condominium buyers. And to defend against it, it can be very expensive in legal fees,” explains Yves Joli-Coeur, expert lawyer in condominiums.
Is there a way to protect yourself? Yes: by taking out property insurance.
“I have a message for any buyer of a new condominium: take out such insurance, but it must absolutely cover legal mortgages,” advises Me Joli-Coeur.
In fact, when you sign an offer to buy a new condo from the developer, even before you pay a deposit, be sure to include the commitment to title insurance that covers legal mortgages as a condition of the preliminary contract. .
Once at the notary, he should warn you that someone may eventually register a legal mortgage on your apartment. It is part of his duty to advise.
He will do his job even better if he suggests that you take out such insurance, which costs a few hundred dollars and is paid only once. This is a small amount compared to the value of the property you are about to buy.
Indeed, the notary must make his checks to find out if such a mortgage exists at the time of signing the contract. But if the construction is not finished, he will not be aware of a dispute between the contractor and the architect or the supplier of plasterboard… And no one can predict the bankruptcy of a contractor.
However, property insurance helps avoid a lot of stress: as soon as a bailiff comes to your home, the insurance company takes responsibility for your defense.
Property insurance is obtained from the notary. It is valid as long as you own your apartment and is passed on to your heirs.
Some insurance companies refuse to sell property insurance if the promoter has a bad reputation.
The property insurance does not cover latent defects or construction quality.
From reading: Condo-Legal • Autorité des marchés financiers • Guide d’Yves Joli-Coeur