November 2010
PFD | Construction

Keep the resolutory clause in mind

By Etienne L. Morin Lawyer

Richard uses your services to construct a building on land he acquired from Sylvain.

When Richard purchased the land from Sylvain, the sales contract included a resolutory clause to protect Sylvain should Richard default.

Richard does not pay you, and you publish a notice of legal hypothec. In the meantime, Richard also defaults on his payment to Sylvain, who decides to execute the resolutory clause.

If you do not take action, the building will revert back to being Sylvain's property as of the date of the sale. You will therefore lose your legal hypothec.

There are two options to avoid this situation:

1. You may obligate Sylvain to go ahead with a sale by judicial authority, but Sylvain's claim will be paid first. More importantly, his claim will be paid before yours. You will also have to guarantee that the sale price is high enough to settle his entire claim;

2. You may remedy Richard's default vis-à-vis Sylvain.

To properly protect your rights and avoid any unpleasant surprises, it is critical that you carry out an in-depth title search before entering into a contract.