Construction insolvency : Protection for suppliers

Are you a contractor or subcontractor in the construction industry? You should be aware that new mortgage regulations will soon be coming into effect. These new rules will have a direct impact on the rate of payment for subcontractors, as banks will be limiting access to loans.

It’s important to understand the implications of these changes, as the traditional deadline for making payment could be extended. This will cause significant difficulties for some businesses, or even complete closing down.

In this article, we’ll try to highlight the solutions available to you if you’re in this situation. It’s essential to take action before it’s too late.

Legal mortgage in the construction industry: essential protection for subcontractors

When it comes to protecting contractors and subcontractors, there are solutions that guarantee payment for work performed. However, it is important to understand and use this method properly, otherwise it could be rendered invalid.

The legal mortgage is a legal provision that provides additional security for subcontractors on a construction project. Governed by the Civil Code of Quebec,this measure guarantees payment to parties involved in construction or renovation work.

Acting in the interests of suppliers

It offers legal protection to subcontractors and material suppliers by ensuring the payment to which they are entitled. This is also the case in the event of financial default by the main contractor or the project owner. A legal mortgage is one of the best ways to protect yourself against non-payment or unstable financial situations.
Note that to benefit from the legal mortgage and ensure maximum protection, subcontractors and suppliers must comply with certain criteria. These include specific deadlines and procedures for notices of denunciation, which vary from jurisdiction to jurisdiction.
The purpose of this notice is to inform the owner or the main contractor of unpaid claims and to assert the right to a legal mortgage. By complying with this formality, subcontractors and suppliers strengthen their legal position and secure their right to the legal mortgage.
To ensure its validity, the notice of denunciation – or denunciation of contract – must be drawn up and sent before work begins. If you have not entered into a construction contract with the owner directly, a very detailed denunciation must be drawn up. To meet the requirements and be considered valid, it must contain the following elements:

  • The name of the owner of the building or property;
  • The name of the contractor responsible for the project;
  • As much information as possible about the original terms of the contract;
  • A description of the work performed, materials or services provided as part of the project;
  • Contact information for the contractor with whom you have a contract;
  • An estimate of the agreed contract price or amount owed

By providing this information clearly and concisely, subcontractors and suppliers strengthen their rights under the legal construction mortgage. This ensures better protection of their unpaid claims.

Benefits for contractors and subcontractors

One of the benefits of a legal mortgage is that it provides contractors and subcontractors with a priority right to payment from the proceeds of the property sale. If there is default on payment, subcontractors can turn to the legal mortgage to ensure they are paid for their services.
It can also help build trust between the parties involved in the construction of a property. Knowing that they have legal protection, suppliers are more inclined to work with contractors and owners of construction firms. This fosters a climate of cooperation in the industry and reduces the risk of payment disputes.

Avoid bankruptcy with a legal mortgage

Legal mortgages also play a crucial role in preventing bankruptcy proceedings for construction companies. Late payment and lack of remuneration for services rendered can have an impact on the financial health of contractors and subcontractors. This can sometimes even lead to bankruptcy. By benefiting from a legal hypothec, subcontractors have a better guarantee of receiving their due. This reduces the risk of serious financial difficulties.

The importance of taking action before falling behind on payments

Whether you work in the construction industry or elsewhere,
it’s essential to take preventive measures before you find yourself in default. That’s where the insolvency trustees at M. Roy & Associés can be of great help. Their expertise and support will help you develop the best financial restructuring strategy for your specific situation.
There are many advantages to taking action before it’s too late:

  • Prevent major financial problems
  • Preserve reputation and business relationships
  • Discover the restructuring options available and tailored to your situation
  • Reduce legal consequences and costly litigation
  • Get sound financial planning

Our expertise enables us to navigate the complexities of the financial system and find solutions tailored to your needs. Our knowledge will enable you to make informed decisions and implement effective measures to meet your financial challenges.

New mortgage regulations will have a major impact on payments in the construction sector. It’s vital for contractors and subcontractors to take measures and act before they start noticing the first signs of financial difficulties.

Call on qualified professionals who can guide you through the process and help you overcome the challenges successfully. Call on qualified professionals who can guide you through the process and help you overcome the challenges successfully.

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