The Traditional Position in Québec

Entities providing one-off instalment sales, leasings (crédit-bails) and leases in Québec are aware that they may register their rights at the Register of Personal and Movable Real Rights ("RPMRR") within fifteen (15) days of the contract and maintain their first position "title retention" in the assets they finance.

With respect to instalment sales, Article 1745 of the Civil Code of Quebec ("CCQ") states:

1745. An instalment sale is a sale with a term by which the seller reserves ownership of the property until full payment of the sale price.

A reservation of ownership with respect to a road vehicle or other movable property determined by regulation, or with respect to any movable property acquired for the service or operation of an enterprise, may be set up against third persons only if it has been published; the reservation may be set up against third persons from the date of the sale provided the reservation of ownership is published within 15 days. As well, the transfer of such a reservation may be set up against third persons only if it has been published.

With respect to leasing (crédit-bails), Article 1847 CCQ states:


1847. The rights of ownership of the lessor may be set up against third persons only if they have been published; the rights may be set up against third persons from the date of the leasing contract provided the rights are published within 15 days.

As well, the transfer of the lessor's rights of ownership may be set up against third persons only if it has been published.

With respect to leases, Article 1852 CCQ states:


1852. The rights resulting from the lease may be published.

Publication is required, however, in the case of rights resulting from a lease, with a term of more than one year, of a road vehicle or other movable property determined by regulation, or of any movable property required for the service or operation of an enterprise, subject, in the latter case, to the exclusions provided by regulation; the rights may be set up against third persons from the date of the lease provided they are published within 15 days. A lease with a term of one year or less is deemed to have a term of more than one year if, by the operation of a renewal clause or other covenant to the same effect, the term of the lease may be increased to more than one year.

The transfer of rights under a lease requires or is open to publication, according to whether the rights themselves require or are open to publication.

There are very important consequences to:

  • Not registering these rights on time, and
  • Not registering these rights at all.

Also, the consequences may not be exactly the same depending on whether we are dealing with an instalment sale, leasing (crédit-bail) or lease.

It is noteworthy that the 15-day rule above does not seem to apply to registering a master instalment, a master leasing (convention cadre de crédit-bail) or master lease. Thus, instalment sellers or financiers operating under floorplan financing agreements and registering a master instalment sale (i.e. master reservation of ownership by the conjunction of Articles 1745 ff. and 2961.1 CCQ), or lessors operating with master leases/leasing agreements and registering a master lease/leasing ((i..e master rights of ownership of the lessor by the conjunction of Articles 1842 ff. and 2961.1 CCQ; or master rights resulting from a lease by the conjunction of Articles 1851 ff. and 2961.1 CCQ) are not affected the changes to the law discussed below. They will continue to need to ensure that they register their rights before making the first delivery of financed property under a schedule to the master instalment sale or master lease/leasing agreement.

Lastly:

  • Making errors in the registrations could be fatal (such as errors in the names of the parties, in the description of assets or VIN numbers in certain circumstances, etc.) or not be fatal (such as errors in the addresses of the parties, etc.), and
  • One must bear in mind that with the passing of Bill 96, An Act Respecting French, the Official and Common Language of Québec ("Bill 96") , all registration must be made in French. It is also now common practice to ensure that even if the underlying documents creating the rights are drafted in English, that they have a French translation of the collateral description which is paramount over the English version. Most add a French translation of any element in the underlying contract that would be transposed or transcribed onto the application for registration form to be filed at the RPMRR.

Effective November 27

Bill 17 (known in French as la Loi modifiant diverses dispositions principalement aux fins d'allègement du fardeau réglementaire et administratif (L.Q. 2023, c.24)) will come into force on November 27, 2023 and change the registration deadlines to register at the RPMRR under Articles 1745, 1847 and 1852 CCQ from fifteen (15) days to seven (7) days.

It is said that the reduction in the delay will reduce uncertainty in commercial transactions.

For some instalment sellers and lessors this will create a big change to their deal processing times and increase the risk of late registrations, which may require obtaining cessions of priority/subordinations/non-interest letters from prior ranking filers against the instalment buyers or lessees.

Fasken provides guidance and support to instalment sellers and lessors in the industry, handling the daily registrations of their rights at the RPMRR.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.