What is the guarantee of property rights?

What is the Property Rights Guarantee in Real Estate in Quebec?

When people talk about the legal real estate guarantee, many immediately think of latent defects.

However, the legal guarantee has two major components: the guarantee of property rights and the quality guarantee. These guarantees exist by operation of law, without the need to expressly inscribe them in the sale contract.

In this Dossier #004 of Real Estate Investigations, let's focus on the first component.

Because buying a property is not just buying a house and land.

It also means acquiring a bundle of rights… with their limits.

What is the guarantee of property rights?

The guarantee of property rights essentially aims to protect the right the buyer acquires in the property, rather than the physical condition of the building.

The Civil Code of Quebec notably provides that the seller must guarantee that the property is free of rights not declared. They must also release it from mortgages that encumber it, unless the buyer has assumed the debt secured by them.

The OACIQ summarizes this guarantee around four main elements: the rights affecting the property, the mortgages, encroachments, and certain public law limitations.

It is very different from a crack in a foundation, water infiltration, or a roofing problem.

The latter lead us rather to the quality guarantee, which we will discuss in the next dossier.

Does being an owner mean you can do whatever you want?

No.

And that is probably the most important idea to remember from this article.

Article 947 of the Civil Code of Quebec defines property as the right to use, enjoy and dispose of a property freely and completely, but adds an essential nuance: this right is exercised subject to the limits and conditions fixed by law.

In other words, you can perfectly be the owner of land without necessarily being able to carry out all the projects you had imagined.

That is where the checks carried out before the purchase become vital.

What rights can affect a property?

A property can be affected by certain rights granted to other people.

The servitude is a common example.

Imagine a right of way that allows a neighbor to move across a portion of your land. You remain the owner of that portion of land, but your right to use it must be consistent with the right granted to the beneficiary of the servitude.

That’s why it is not enough to look at the land area on a description sheet.

You must also understand the rights that can affect it.

Article 1723 specifically provides that the seller must guarantee that the property is free of all rights, except those declared at the time of sale.

What happens to the seller’s mortgages?

A mortgage registered against a property does not simply disappear because the property changes owners.

The Civil Code provides that the seller must purge the property of mortgages that encumber it, even when they have been declared or registered, except when the buyer assumes the debt secured by the mortgage.

In a traditional real estate transaction, the notary obviously plays an essential role in title checks and in the process enabling the necessary cancellations to be carried out.

It’s another good example of the difference between buying the building and legally acquiring the rights to the building.

What is an encroachment?

An encroachment occurs when a construction, structure, or use extends onto another’s property.

Think, for example, of a fence, a shed, or part of a construction that would be beyond the real boundary of the land.

The Civil Code provides that the seller must guarantee the buyer against any encroachment he himself commits, unless he declared it at the time of sale. This guarantee also covers encroachment by a third party that began before the sale and of which the seller was aware.

Again here, the exact facts are important.

Not all encroachments have the same consequences, and a particular situation may require the intervention of a notary, a land surveyor, or another professional.

What is a public law limitation?

This is probably the least known aspect of the general public.

Certain rules from public authorities can limit the use of a building. The OACIQ cites examples such as municipal zoning rules, protection of agricultural land, and cultural heritage.

Article 1725 of the Civil Code provides that the seller guarantees the buyer against certain violations of public law limitations that encumber the property and that fall outside the ordinary property rights.

However, this guarantee has important exceptions, notably when the limitation was disclosed to the buyer, when a prudent and diligent buyer could have discovered it due to the nature, location and use of the premises, or when it has been recorded at the Land Registration Office.

That is why it would be overly simplistic to say:

“There is a restriction, so the seller is automatically responsible.”

That is not how the mechanism works.

An example: can I build a garage on my land?

Take the example used in my video.

You visit a property with a huge piece of land.

During the visit, you already imagine your future detached garage:

“Perfect! I’ll build it right here.”

You buy the property and become its official owner.

But is your project automatically feasible?

Not necessarily.

A servitude could affect the planned location. A municipal regulation could impose constraints. Another applicable limitation could also impact your project.

You do own the land.

But your right to use it may have limits.

And above all, not all possible limitations automatically constitute a problem covered by the seller’s guarantee. The nature of the limitation, what was declared, what could be verified, and the particular circumstances of the transaction must be considered.

Why is the buyer’s project important?

Because in real estate, it is not always enough to ask:

“Does this house suit me today?”

We must also ask:

“What do I want to do with this property?”

Build a garage?

Add a dwelling?

Install a pool?

Expand?

Operate a particular activity?

Change the use of the building?

Depending on the project, the relevant verifications will not necessarily be the same.

That is why an real estate project should be analyzed as a whole: the property, the rights affecting it, and the use the buyer wishes to make of it.

What is the role of the real estate broker?

The broker’s role is not to replace the notary, the land surveyor, the lawyer, the inspector, or the municipality.

It consists notably of asking questions, verifying, informing, and advising within the limits of their competence, then guiding their client to the right professional when a specialized check becomes necessary.

The OACIQ also imposes on brokers duties of verification, information, and advice, particularly concerning limitations that may affect property rights.

For me, a simple question can sometimes make a big difference:

“What do you intend to do with this property?”

The answer can guide several checks even before drafting a purchase agreement.

Can you buy without the property rights guarantee?

The legal guarantee can, in certain circumstances, be increased, decreased, or excluded by agreement.

However, the OACIQ notes that it is much more common to see an exclusion of the quality guarantee and that, with rare exceptions, exclusion of the property rights guarantee is not recommended.

This is a particularly important distinction when a property is advertised as being sold “without legal quality guarantee, at the buyer’s risk and peril”.

One should not automatically interpret this wording as meaning:

“No guarantee of any kind.”

You must carefully read the applicable clause and understand exactly which guarantee is excluded.

What is the difference between the property guarantee and the quality guarantee?

It can be summarized very simply:

The guarantee of property rights mainly concerns the rights you acquire.

The quality guarantee mainly concerns certain defects affecting the property.

The Civil Code treats them in two distinct sections: articles 1723 to 1725 cover the guarantee of property rights, while the quality guarantee begins at article 1726.

It is this second guarantee that will eventually lead us to a much more well-known concept: latent defect.

But before talking about latent defects, we must understand what the quality guarantee actually protects.

That will be the subject of our next investigation.

What should be remembered about the guarantee of property rights?

If you remember only one sentence from this dossier, remember this:

Buying a building also means acquiring a bundle of rights… with their limits.

Being a property owner does not necessarily mean you are free to carry out any project.

Before buying, it is important to understand what you are buying, which rights affect the property, and whether your project is compatible with the features and limitations applicable to the property.

This is where due diligence takes on full meaning.

🔎 Dossier #004: solved.

Next investigation: What is the legal quality guarantee?