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Olivier Lessard

As of June 2002, the legislator amended the articles 2667 and 2762 of the Civil code of Québec to end a jurisprudential conflict, disagreeing whether if it was possible or not to claim the extra-judicial professional fees in the exercise of hypothecary rights, especially when an act would contain a stipulation stating that the debtor would pay them[1]. Articles 2667 and 2762 C.c.Q. are now written as follows:

2667. A hypothec secures the capital, the interest accrued thereon and the costs, other than extra-judicial professional fees, legitimately incurred for their recovery or to conserve the charged property.

2762. A creditor having given prior notice of the exercise of a hypothecary right is not entitled to demand any indemnity from the debtor except the interest owing and the costs incurred.

Notwithstanding any stipulation to the contrary, the costs incurred exclude extra-judicial professional fees payable by the creditor for services required by the creditor in order to recover the capital and interest secured by the hypothec or to preserve the charged property.

It is now clear, following the recent jurisprudence, that the extra-judicial professional fees are now excluded from the costs legitimately incurred by the creditor to recover his debt or to conserve the charged property[1]. The “costs incurred” may include judicial fees or professional fees (from a professional other than a lawyer), for example. The Court of Appeal recently took position regarding that matter, stating that a hypothecary creditor cannot claim the extra-judicial fees from his debtor regarding the exercise of a hypothecary right, and that this rule also applies to the later ranking hypothecary creditors[2].

Therefore, even if the act which the hypothecary right is based on contains a stipulation stating that the debtor is responsible for the extra-judicial professional fees incurred by the exercise of the hypothecary right, this stipulation would declared null[3] since the stipulations of paragraph 2762 (2) C.c.Q. are public order[4].

However, a hypothecary creditor still has the possibility to claim extra-judicial professional fees from his debtor in the case of a personal action, but only as damages, which the creditor would have to prove. This claim would only be possible if there is a stipulation in a contract stating that the debtor has to reimburse them (as long as the stipulation in determinate or determinable[5]), or, if the debtor acts in an abusive/improper manner[6]. In all cases, the incurred costs claimed by the creditor have to be reasonable and legitimate, as previously stated by the jurisprudence[7].

[1] 3415384 Canada inc. c. Denis, 2014 QCCQ 8199 (CanLII), para 13.
[2] Canada (Procureur général) c. Caisse populaire St-Joseph-de-Bordeaux, 2012 QCCA 826 (CanLII), para 44-54.
[3] Banque de Montréal c. Équipements B. Morin inc., 2011 QCCS 30 (CanLII), para 47.
[4] Édith LAMBERT, Les sûretés, Vol. 5 Exercice des droits hypothécaires et extinction des hypothèques (art. 2748 à 2802 C.c.Q.), p. 314-315.
[5] Louis PAYETTE, Les sûretés réelles dans le Code civil du Québec, voir note 1, p. 321-326.
[6] Idem, p. 316.
[7] 164618 Canada Inc. c. Montreal Trust, [1998] R.J.Q.2696 (C.A.)
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