Giving in Payment Clause in Quebec Mortgages: Complete Guide

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The giving in payment clause is a legal mechanism in Quebec mortgage law through which the lender can request to become the owner of the immovable property in full satisfaction of the mortgage debt. This remedy, provided by the Civil Code of Quebec (CCQ), is one of four hypothecary rights available to a creditor in case of borrower default. When giving in payment is pronounced by the court, the lender acquires ownership of the property and, in return, the borrower is entirely released from the remaining debt, even if the property's market value is less than the amount owed. This characteristic distinguishes giving in payment from sale under judicial authority, where the borrower could remain responsible for a deficiency. The giving in payment process follows the same steps as other hypothecary remedies: notice of default, prior notice registered at the Land Registry, and a 60-day period for residential property. During this period, the borrower retains the right to remedy the default. Giving in payment is particularly relevant when the property value has fallen below the mortgage balance, as it protects the borrower against a deficiency judgment. AMF-certified mortgage brokers in Quebec can explain the implications of this clause when signing the mortgage deed.

The Giving in Payment Clause: A Hypothecary Remedy Unique to Quebec

Giving in payment is one of the most significant hypothecary remedies in Quebec civil law. Provided for by the Civil Code of Quebec, it allows the hypothecary creditor to ask the court to award ownership of the immovable property in full settlement of the debt. This mechanism, unique to the Quebec legal system within the Canadian context, has profound implications for both lender and borrower.

How Giving in Payment Works

Default identified: The lender determines that the borrower is in default of their mortgage obligations, generally due to missed payments or failure to comply with a contract condition.
Notice of default (mise en demeure): The lender sends a formal notice of default to the borrower, advising of the default and granting a reasonable period to remedy it.
Prior notice of intent to take in payment: If the default persists, the lender serves a prior notice of the exercise of a hypothecary right, specifically indicating the intention to exercise taking in payment. This prior notice must be registered at the Quebec Land Registry.
60-day period: A 60-day period runs from the registration of the prior notice for residential property. The borrower can remedy the default during this period.
Application to the court: Upon expiry of the period, if the default is not corrected, the lender presents its application to the court. The judge evaluates the situation and may pronounce giving in payment.
Transfer of ownership and release: If the court grants giving in payment, the lender becomes the owner of the property. In return, the borrower is entirely released from the remaining mortgage debt.

Legal Effects of Giving in Payment

The most important effect of giving in payment is the complete release of the borrower. Unlike sale under judicial authority, where a deficiency could remain, giving in payment extinguishes the debt in its entirety regardless of the property's actual value. If the property is worth $250,000 but the mortgage balance is $300,000, the borrower is released from the full $300,000 by surrendering the property. The lender assumes the risk of the loss in value.

Distinction from Other Hypothecary Remedies

It is essential to distinguish giving in payment from other creditor remedies. In a sale under judicial authority, the property is sold at auction and the proceeds are distributed to creditors. If the proceeds are insufficient, the borrower could owe the difference. In a sale by the creditor, the lender conducts the sale with transparency obligations. Taking possession for purposes of administration allows the lender to manage the property and collect income without becoming the owner. Only giving in payment results in a transfer of ownership with complete release from the debt.

Frequently Asked Questions

What is giving in payment in the Quebec mortgage context?

Giving in payment is a hypothecary remedy under the CCQ that allows the lender to become the owner of the property in full satisfaction of the debt. The borrower loses the property but is entirely released from the balance owed, even if the property value is less than the mortgage amount.

Is giving in payment advantageous for the borrower?

It can be under certain circumstances. If the property value is less than the mortgage balance (negative equity situation), giving in payment releases the borrower from the entire debt. The borrower will not have to repay the difference between the balance owed and the property value, unlike what may occur in a sale under judicial authority.

Can the lender force giving in payment without court approval?

No. Giving in payment must be pronounced by the court. The lender must follow the complete process provided by the CCQ: notice of default, prior notice registered at the Land Registry, 60-day period for an immovable, then application to the court. The borrower can contest the application.

Can I prevent giving in payment?

Yes. During the 60-day period following registration of the prior notice, you can remedy the default by paying arrears, interest, and costs. You can also sell the property yourself to repay the lender, or contest the application before the court if you believe the process was not followed.

Does giving in payment exist in other Canadian provinces?

No. Giving in payment is a concept specific to Quebec civil law, derived from the CCQ. In common law provinces, the equivalent mechanisms are power of sale and judicial foreclosure, which function differently and do not necessarily offer the same complete release from the debt.