For New Residential Buildings
Here are some examples of what is not covered by the Guarantee Plan:
New home or condo guarantees do not cover legal mortgages! You must therefore be very careful when you make payments to the contractor and make certain you are protected.
The Civil Code of Québec grants special status to debts owed to parties that have participated in the construction of a building (workers, contractors, subcontractors, materials suppliers, engineers, architects). These debts can lead to legal mortgages.
A legal mortgage allows, for example, a subcontractor who was not paid by the general contractor to claim the amount due to him from you, even if you paid your contractor in full. If not paid, the subcontractor can apply for a mortgage on your house, becoming a second owner, but he can even demand for the sale of the home.
Obviously, it is difficult to ensure that your contractor will pay all of their employees, subcontractors, and materials suppliers. The Civil Code of Québec does, however, contain clauses that allow you to reduce the risk of being confronted with legal mortgages.
Among other things, you can ask the contractor for a complete list of their employees, subcontractors, and materials suppliers. As article 2122 of the Civil Code states, while the contractor may require partial payments for the value of the work performed and the materials needed, before doing so, they are required to furnish you with a statement of the amounts paid to subcontractors and materials suppliers and the amounts still owing to them.
You can then, pursuant to article 2123 of the Civil Code, instruct your notary to withhold the amounts needed to cover any potential legal mortgages until you have been assured that all of the employees, subcontractors, and materials suppliers have been paid in full.
If, after taking these steps with your contractor, you are concerned about finding yourself in such a situation, the best idea is to consult a lawyer.