Executive summary

Can a legal hypothec arise from plans and specifications drawn at a project’s permitting and authorization stage, even when those plans are not used for the project’s construction? In a recent decision, the Quebec Court of Appeal held that an architectural firm could indeed validly create a legal hypothec of construction, even though the firm had contributed plans and specifications that were only used to obtain the necessary permissions for the transformation and renovation of a building.[1]

Background

In April 2015, a real estate developer (the “Developer”) began a project to transform an old Outremont convent into a high-end residential complex.

The Developer mandated an architectural firm (the “Architects”) to, among other things, secure residential zoning, produce a compliant implementation and integration plan, and assist the Developer in obtaining the approvals required from various decision-making authorities. The Architects subsequently prepared plans and specifications, which were revised several times to meet the requirements of the Urban Planning Advisory Committee (UPAC). The project was ultimately authorized based on the documents and plans provided by the Architects.

However, before the work began, the Developer decided to retain a different firm to prepare and issue the plans and specifications for the building’s construction. The Developer ended its business relationship with the Architects without paying the totality of fees owed. Feeling that their work had added value to the building, the Architects published a notice of legal hypothec and a prior notice of exercise of hypothecary rights, intending to have the building sold under judicial authority.

Can plans not used for construction still give rise to a legal hypothec?

The dispute hinges on a familiar question for construction professionals: do professional services rendered at the permitting and authorization stage add value to the building, and are those services sufficient to justify a legal hypothec even though work has yet to begin and another firm has taken up the project?

The Developer argued the answer to both questions was “no,” claiming that though the Architects’ plans helped secure authorizations and residential zoning, they were never used to carry out the work. The building was ultimately renovated using plans prepared by another architectural firm. As such, the Developer claimed a legal hypothec could not be created for plans unrelated to the construction work actually carried out. It added that the hypothec was published before construction began, which ran counter to the law.

For their part, the Architects argued that their work was instrumental in obtaining authorizations and that their plans inspired and/or laid the groundwork for the architectural firm that succeeded them. The Architects maintained that, though their work was less tangible in the final result, it clearly added enough value to the building to create the right to a legal hypothec. 

Decision of the Court

The validity of a legal hypothec of construction rests in part on whether the work has contributed to the project and added value to the building.

The courts construe “work” broadly. This work may contribute directly to construction, but it could also constitute an essential step in executing the project.

The totality of the work completed on the project is taken into account when assessing whether or not the work in question adds value to the building. This added value can be demonstrated with a rebuttable presumption: the creditor need only prove that the work has contributed to the building’s free-market economic value. This presumption can be rebutted, but the burden of proof falls on the opposing party.

In this case, the Court of Appeal affirmed that the services rendered by the Architects to secure authorizations were necessary to carry out the project, since the project would not have proceeded without them. Though the Architects’ plans were not used to renovate the building, they were used by the second architectural firm numerous times, notably to obtain additional permits.

Additionally, though no added value could be linked specifically to the Architects’ services, those services were essential to the totality of the renovation work, which did add value to the building. The Court thus held that the services rendered by the Architects had increased the building’s value.

The fact that the renovation had not begun when the legal hypothec was published had no bearing on the finding that the Architects added value to the building.

The Architects were thus within their rights to register a legal hypothec.

Conclusion

In sum, a professional can assert their right to a legal hypothec provided their work concretely furthered the project. This is an important reminder for anyone completing work prior to construction: any preliminary contribution to a project could give rise to the right to a legal hypothec.

To find out more about your rights or whether your construction projects can give rise to legal hypothecs, reach out to any member of our Construction and Infrastructure team. Our professionals will be happy to assist you.

[1] 9221-2323 Québec inc. c. Lemay Co inc., 2025 QCCA 99 (appeal of Lemay Co inc. c. 9221-2323 Québec inc., 2023 QCCS 1198)