Real Estate Litigation 2025 Comparisons

In Quebec, in the context of a default on a loan, unless the debtor voluntarily surrenders the property to the secured creditor, the process to recover property on which a secured creditor has hypothecary rights (ie, foreclosure) is judicial in nature. To commence the process, the secured creditor must first send prior notice to the debtor of its intent to exercise its hypothecary rights, while specifying the type of exercise, such as the sale of the property under court supervision or taking the property in payment. If the debtor fails to remedy its default or contest the notice sent by the secured creditor, then the latter can obtain a judgment from the court authorising the exercise of its hypothecary right. 

Typically, such a mortgage will include a provision that permits the secured creditor to receive rents and apply them towards the immediate repayment of the debt upon the occurrence of an uncured event of default. In these situations, the process is non-judicial, allowing a first-ranking secured creditor to send a notice to the debtor withdrawing its authorisation to receive the rents. This action is subject to the creditor’s rank and any priority agreements regarding rents that may have been made with other creditors.

Foreclosure on pledged equity is a process by which a creditor takes control of a borrower’s equity interests in a property as collateral for a loan. This approach is often used in other jurisdictions to avoid the lengthy and complex procedures associated with traditional mortgage foreclosures. However, there is no such process under Quebec law. 

The notice period for exercise of a hypothecary right by a secured creditor on real property is 60 days, and must be served to the debtor by bailiff and registered at the appropriate land registry office. The notice must clearly outline the debtor’s default and explain how it can be remedied. Under the Bankruptcy and Insolvency Act, there is a concurrent 10-day notice requirement if the debtor’s default is due to its insolvency. In practice, the secured creditor will typically send both notices simultaneously and often obtain a waiver of the 10-day notice.

The borrower can remedy its default and pay its debt any time before the real property is sold under judicial supervision. If the secured creditor is exercising its right to take the real property in payment (paying off the debt with the property of a lower or greater value), the default must be cured before judgment, as a judgment of surrender of the immovable property constitutes the secured creditor’s title of ownership in accordance with the Civil Code.

In the context of insolvency, the debtor can make a proposal to its creditors to avoid surrendering its assets. This proposal is a formal arrangement that allows the debtor to restructure its debt and negotiate new terms with creditors. The primary goal is to reach a mutually agreeable solution that ensures that the debtor can continue operations while satisfying creditor claims to the greatest extent possible.

The Civil Code allows secured creditors to combine with its other legal remedies a statement of claim and the exercise of a hypothecary right, thereby effectively exercising various remedies against the debtor at the same time. For instance, if there are other joint guarantees, the secured creditor can decide to sue either the main debtor or the guarantor or both, with the only limitation being that they can oppose the same grounds of defence. The debtor’s right to cure the default, as more fully set out in the previous section, is not affected by this.

In Quebec, the duration of foreclosure processes can vary significantly, depending on whether the foreclosure is judicial or non-judicial. Judicial foreclosure processes typically take between three and six months from the filing of the legal application to the time the court judgment is rendered. Non-judicial foreclosures generally take less time, and are completed in a matter of weeks.

In Quebec, if there is a deficiency following a creditor’s exercise of its hypothecary rights, the creditor retains a claim against the debtor for the balance due, plus costs and interest until the debt is paid in full. Such a claim is unsecured, and the creditor would therefore be ranked as an ordinary creditor in the event of bankruptcy.

The creditor can also ask the court to facilitate the execution of the judgment, which may include measures such as seizing bank accounts or placing liens on other assets.

In Quebec, a joint venture (co-enterprise) is a contractual agreement between two or more legal entities that come together for a limited time to achieve a specific goal but maintain their individuality throughout the process. This concept is not specifically codified in the Civil Code and therefore leaves the parties to be governed by the agreement that establishes the terms and conditions of their relationship.

Investing in commercial real estate is often done through corporations, partnerships, co-ownerships, or trusts. Such vehicles can either directly own the property, with a joint venture agreement and other ancillary documents detailing the terms of co-ownership, or acquire shares or units in a corporation or partnership that holds the real estate. The ideal investment vehicle depends on factors such as financial stability, tax considerations, operational efficiency, and overall business objectives.

No matter the vehicle used to enter into a joint venture agreement, cooperation among the various stakeholders is required. In fact, courts will confirm that a joint venture exists only when the parties clearly express their intent to unite temporarily, explicitly excluding the creation of a partnership. The joint venture agreement will generally be negotiated at length to properly govern and reflect the relationship among each interested party, especially since the responsibility of each partner is joint and several (solidary) towards third parties. In a typical joint venture agreement, the parties will detail the creation and powers of a management committee in charge of any aspect of the project subject to the joint venture agreement. The parties will often have equal powers within that committee.

The parties to a joint venture will be bound to respect the terms of the agreement governing their relationship, as well as the laws and regulations applicable to their structure. In addition to the Civil Code, certain corporate considerations and the enforceability of certain provisions of shareholder agreements to which certain stakeholders may be bound are governed by the Business Corporations Act (Quebec) or the Canada Business Corporations Act, depending on whether a corporation was federally or provincially incorporated.

The remedies available against parties who violate their legal and contractual duties under a joint venture agreement include the following, and are usually clearly specified in said agreement:

• Mechanisms to terminate the joint venture agreement. Note that, in cases of direct ownership of the real property by the partners, the joint venture agreement should include detailed terms for the sale of either the beneficial or the registered ownership of the property.

• Specific clauses (such as hardship clauses) to manage disagreements between the parties and to force the sale or buyout of the defaulting party’s interest.
• Indemnification to cover the losses incurred due to the default; however, well-drafted joint venture agreements will provide for limitations to damages that may be claimed by one party against the other.
• Obtaining a decision from the court ordering the defaulting party to fulfil its contractual obligations as originally agreed.
• Termination of the joint venture for cause, in particular when one of the parties fails to perform its obligations or hinders the activity of the others.

If the joint venture’s governing documents are silent or vague, do not include an arbitration clause or allow for a decision-making stalemate, the general articles of the Civil Code relating to contracts shall apply and the parties will have to go before the applicable Quebec courts to resolve the management dispute.

Automatic judgment provisions allow for a judgment to be entered without a trial under certain conditions, often to expedite the resolution of a case, while provisional remedies are prejudgment or pre-trial court orders designed to preserve the status quo until a final judgment is issued. Automatic judgment provisions are not available in Quebec, while provisional remedies and safeguard orders remain exceptional, and are more fully detailed in the following sections.

The governing contracts between the parties will usually provide for the terms and conditions of the termination or winding down of the joint venture. Absent such provisions, the terms of the Civil Code regarding general termination of a contractual relationship shall apply. As a general rule, a joint venture agreement is terminated: (i) with the consent of all partners; (ii) by the expiry of its term; (iii) by the fulfilment of the condition attached to the agreement; or (iv) by the achievement of its objective or the impossibility of achieving it. If the joint venture was created between two parties only, it is also terminated by the death or bankruptcy of one of the parties or by the appointment of tutor for a person of age or a protection mandate homologated for them.

It is important to note that any decision or action made vis-à-vis a third party in accordance with the joint venture’s activities, unaware of the termination of the agreement and acting in good faith, binds all the other parties.

In the context of commercial real estate loans in Quebec, the following types are the most common types of guarantees (suretyships).

• Corporate or personal guarantee: a guarantee often provided by a parent company or a financially stable subsidiary of the debtor, whereby the guarantor assumes the financial responsibility for either a portion or the totality of the loan, including principal and interest.
• Real guarantee (cautionnement réel): a legal arrangement by which a person, known as the “real guarantor”, pledges one or more of their assets to secure someone else’s debt. This type of guarantee is governed by the rules related to immovable hypothecs (mortgages) rather than movable hypothecs (personal property security) or personal guarantees. The real guarantor does not assume personal liability for the debt; instead, their responsibility is limited to the assets they pledged.
• Carve-out guarantee: in Quebec, non-recourse carve-out guarantees, often referred to as “bad boy” guarantees, are specific provisions in loan agreements that hold the borrower or guarantor personally liable for certain wrongful actions. These actions can include fraud, misrepresentation, environmental liability, and other acts that could harm the lender’s interests.
• Cost overrun and completion guarantee: a cost overrun and completion guarantee is more of a personal undertaking than a third-party guarantee and ensures that: (i) if the project costs exceed the allocated budget, the guarantor is responsible for covering the excess amount and (ii) if the borrower fails to complete the project, the guarantor must either complete the project at their own expense or reimburse the lender for the costs incurred to finish the construction.

While there are no specific rules or limitations unique to Quebec regarding non-recourse carve-out (“bad boy”) guarantees other than the obligation of each party to act in good faith, such guarantees will be closely analysed by the courts in litigation contexts. The key is that these carve-outs, established by contract and whose scope varies depending on the type of transaction, are designed to protect the lender by ensuring that the borrower or guarantor cannot engage in certain “bad acts” without facing personal liability, even in the event that they are released from their obligations under the loan agreement.

The elements that are important in enforcing completion guarantees in Quebec are the clarity of the contract creating the guarantor’s obligation and the ability of the creditor to provide evidence that the principal debtor has defaulted on their obligations. Subject to contractual waivers set out in the guarantee agreement, including, for instance, misrepresentation, lack of capacity or superior force, guarantors can set up any remedy available at law or under contract against the creditor.

Waivers of defence that have been contractually agreed upon by the guarantor in a guarantee agreement are enforceable in the province of Quebec. In fact, a guarantee that explicitly states that it is absolute and unconditional may waive certain defences otherwise available to the guarantor, save and except for defences that are protected under applicable law, such as the defence of fraud, lack of capacity of the guarantor to enter into the agreement (unless the procedural principles regarding the signature of guarantees by natural persons are not followed) or a defence based on public order. If there are several guarantors, it is important that they all waive the benefit of division and discussion, otherwise the creditor may be limited in terms of recourse.

In Quebec, there are no specific expedited judicial procedures for guarantee enforcement under the Civil Code or the Code of Civil Procedure. However, a motion to appoint an interim receiver under bankruptcy and insolvency legislation can be filed. This procedure allows for the temporary management of a debtor’s assets by a court-appointed receiver, but it is primarily intended for insolvency situations rather than guarantee enforcement.

As for statutory limitations in Quebec, bankruptcy and insolvency laws provide for certain limitations that affect a lender’s ability to enforce the provisions of a guarantee, as follows.

• When a debtor files for bankruptcy, an automatic stay of proceedings comes into effect. This stay prevents creditors from taking or continuing any civil action against the debtor intended to collect debts or enforce guarantees without the permission of the bankruptcy court. This means that creditors, unless they have sent their prior notice and the deadline has expired, must wait until the stay has been lifted or seek court approval to proceed with their legal actions.
• To ensure that the debtor’s obligations under the guarantee comply with legal standards, the courts have the authority to review and potentially modify its terms if they are considered abusive.
• Under the Bankruptcy and Insolvency Act (BIA), certain transactions concluded before the debtor’s bankruptcy can be challenged and potentially voided. If a debtor transferred property to avoid creditors or made payments to a creditor that preferred one creditor over others, or if the transfer was for less than fair market value, these transactions can be reversed.

Arbitration clauses are commonly found in real estate transactions in Quebec, whether regarding the sale or lease of property, as an alternative to traditional litigation. Some parties may hesitate to elect to proceed with arbitration as the decisions are final and binding, with no option to appeal through the courts. However, arbitration offers a faster, more cost-efficient way to resolve disputes compared to the lengthy process of traditional litigation – although, in recent times, it has been deemed to be less cost-efficient. For an arbitration clause to be valid, the arbitration decision must be final and binding, and thus exclude any recourse to the courts.

In Quebec, arbitration clauses are more commonly used in commercial leasing to determine the damages incurred should the landlord or tenant be in default.

In addition to being completely confidential, arbitration is a quicker and more cost-efficient way to resolve disputes than traditional litigation.

One of the unattractive elements of arbitration in Quebec is that the decisions are usually final and cannot be easily appealed, which can be problematic if an error is made by the arbitrator or panel of arbitrators, or if impartiality is in question.

Although the courts promote and encourage the parties to proceed through mediation, its use is less common in real estate transactions in Quebec and typically depends on the preferences of the parties involved.

In Quebec, a party involved in a real estate dispute can seek a provisional injunction, which is initially valid for ten days but may be renewed or even modified into a safeguard order. A safeguard order typically lasts for a period of six months, but can also be extended. These provisional remedies are useful and deployed to prevent adverse events or actions related to the property in question.

In commercial leasing, such orders are usually sought to ensure payment of the rent and the arrears during litigation, to force payment of occupational rent during bankruptcy proceedings, subject to some conditions, as mentioned above, or to gain access to the premises or facilitate the undertaking of certain work therein.

A court order is needed to obtain a provisional remedy in the context of real estate transactions in Quebec. To be granted a court order, an applicant must demonstrate the same cumulative elements set out in 1.4.1 Injunctive Remedies for Tenants Facing Insufficient Cure Periods, namely the following.

• Urgency: the relief sought must require the immediate intervention of a court to prevent significant or irreparable harm, and the tenant needs to have acted diligently in the preservation of their rights.
• Appearance of right: the tenant needs to demonstrate a prima facie right to the remedy being sought.
• Serious or irreparable harm: the tenant has the burden of demonstrating that they would suffer serious or irreparable harm should the injunctive relief sought not be granted.
• Balance of inconveniences: the harm to the tenant if the injunction isn’t granted must outweigh the harm to the landlord if it is granted.

If the plaintiff improperly uses provisional remedies, a court can order them to pay damages if it effectively finds that the plaintiff’s action in seeking the provisional remedy is abusive, meaning that it has no serious chance of obtaining such a remedy, or that it sought to inconvenience or cause damages to the other party. A plaintiff being found to have acted abusively in its application to obtain a provisional remedy can be ordered to pay court fees, damages, and even the defendant’s legal fees.

Temporary injunctions are considered exceptional in nature and, although the court is typically reluctant to render a decision that could impact the transaction without a full hearing, a court may do so if necessary to preserve the current situation between the parties and prevent harm during the proceedings.

Under Quebec law, to obtain injunctive relief, the plaintiff has the burden of proving serious or irreparable harm, which means that the harm that the plaintiff would suffer if the injunction were not granted could not be remedied or would be very difficult to remedy. While economic harm is usually not regarded as irreparable, it can be considered serious in certain situations, such as if the plaintiff faces the imminent risk of bankruptcy.

Persons having taken part in the construction or renovation of an immovable, which may include a large array of tradespeople, may publish a legal hypothec (mechanic’s lien) on the real property on which the work was performed. It exists only in favour of the architect, engineer, supplier of materials, worker, contractor or subcontractor for the work requested by the owner of the immovable, or for the materials or services supplied or prepared by them for the work. It isn’t necessary to publish a legal hypothec for it to exist.

A legal hypothec in favour of persons having taken part in the construction or renovation of an immovable subsists, even if it has not been published, for 30 days after the work has been completed. It subsists if, before the 30 days expire, a notice describing the charged immovable and indicating the amount of the claim is registered. The notice shall be served on the owner of the immovable. It expires six months after the work is completed, unless, to preserve the hypothec, the creditor registers an action against the owner of the immovable or a prior notice to exercise a hypothecary right.

The hypothec secures an increase in value given to the immovable by the work, or the materials or services supplied or prepared for the work. However, when those in favour of whom it exists did not, they themselves, enter into a contract with the owner directly, the hypothec is limited to the work, materials or services supplied after written notice of the contract to the owner. A workman, however, is not bound to give notice of contract.

Once all requirements have been met, the creditor in favour of which a legal hypothec has been published must exercise its hypothecary rights like any other hypothecary creditor in Quebec, as further detailed in the previous sections.

Real Estate Investment Trusts (REITs) are trusts that own and manage real estate assets, including residential properties. In Quebec, REITs are primarily regulated by the Autorité des marchés financiers (AMF), which oversees financial markets and ensures compliance with securities laws. Although their status as publicly traded entities means they are regulated by the Securities Act and its regulations, bulk purchases and management of residential units by REITs in Quebec are still primarily subject to the provisions of the Civil Code, the Act respecting the Administrative Housing Tribunal and the Code of Civil Procedure. The rights and obligations of each party are more particularly set out in the chapters of the Civil Code on residential and low-income rentals, administration of property and sale. The organisations and government entities responsible for developing and enforcing such regulations, other than the provincial government itself, are the TAL and the SHQ. Courts having jurisdiction will also hear disputes in this regard.

We do not have the required expertise or information on this topic as it relates to the province of Quebec.