Bill 96: What are the Impacts on Real Estate Transactions?
On June 1, 2022, Bill 96 received Royal Assent and became An Act respecting French, the official and common language of Québec under chapter 14 (the “Act”). Several provisions now in effect have an impact on certain real estate transactions in Quebec.
What Has Changed?
The purpose of the Act is to further promote the use of the French language in Quebec and to reiterate the formal recognition of French as the official language in Quebec. In particular, the Act amends certain provisions of the Civil Code of Québec governing the language of registrations in the Land Registry Office (the "Land Registry").
As of June 1, 2022 (or as of June 1, 2023 for contracts referred to in the third paragraph below):
- A declaration of co-ownership (i.e. condominium), as well as amendments to the constituting act of co-ownership and the description of the fractions of co-ownership, must be registered exclusively in French with the Land Registry, unless the amendments modify or correct a declaration or act registered before June 1, 2022. It should be noted that the vast majority of declarations of co-ownership are already written and registered in French.
- Contracts of sale or exchange of all or part of a primarily residential immovable of less than five dwelling units or of a fraction of a primarily residential immovable held in co-ownership must all be drafted in French, unless the parties expressly state their intention to draft them in another language. If these documents are drafted in English and must be registered in the Land Registry, as of September 1, 2022, they must be translated in order to be accepted for registration in the Land Registry. It should be noted that although they are not registered in the Land Registry, the offer to sell these buildings, the preliminary contract between the purchaser and the builder or developer and the disclosure memorandum provided to a purchaser must also be drafted in French, unless the parties expressly intend to draft them in another language.
- If a contract referred to in the preceding paragraph (or any other contract relating to real property) is a contract of adhesion, it will be subject to the rules of the Act on the language of contracts of adhesion, which will come into force on June 1, 2023. In order for the contract to be drafted in a language other than French, not only must it be the express wish of the parties to draft it in that language (as is currently the case for all contracts of adhesion), but a French version of the contract must also be presented to the adhering party. The Civil Code of Québec states that "a contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on its behalf or upon the instructions, and were not negotiable.”
As of September 1, 2022:
- All applications for registration (i.e. documents that must or may be registered in the Land Registry) must be in French (including the cadastral descriptions contained therein), regardless of when they are signed. If a document is in English, it must be submitted by way of a summary in French, to which the English document and an authenticated translation into French (certified by a translator) are attached. However, it is possible to register a document in English that amends or corrects a document registered before June 1, 2022.
- If a plan or other document accompanying the principal document is drafted in English, it must also be accompanied by an authenticated translation.
What Are The Impacts on Your Real Estate Transactions?
The non-registered documentation for a transaction is not required to be drafted entirely in French (subject to the rule on adhesion contracts), even if doing so would avoid any ambiguity related to the translation of documents drafted in English (and registration of the required transaction document or registration of a certified translation). The parties to a transaction will have to take into account that, in the event of a difference in interpretation between the English and French versions of a document, the nature of the obligations agreed upon between the parties could differ from those registered in the Land Registry and enforceable against third parties. Legal opinions rendered in the context of transactions will also have to take this additional risk into account.
The use of short form deeds of sale and hypothec (i.e. mortgage) in English or French for registration purposes in a commercial real estate transaction where the parties choose English as the language of the principal transaction agreements seems to be the current practice in many cases, and likely a “best practice” particularly with the adoption of the Act.
In order to minimize translation costs and risks associated with the new requirements under the Act, there seems to be a consensus among many law firms to favour the execution and registration of such short form deeds of sale and hypothec in French, which refer to the additional rights and obligations of the parties provided for in non-registered English agreements.
Another practice that could develop is the preparation of a deed drafted primarily in English, but with the essential clauses for registration drafted in French. The deed would be registered by extract in the Land Registry (i.e. by way of the presentation of only certain parts of a deed) so that only the French clauses would form part of the registration requisition and the English clauses would be omitted from it.
Particular attention must be paid to the description of immovables, especially immovables encumbered by an immovable hypothec and that are also described or mentioned in a credit agreement drafted in English, to avoid any ambiguity as to their identification. It would be prudent to obtain technical descriptions of the immovables in French.
If the parties prefer to draft their registrable deed in English, additional time may be required to obtain the authenticated translation of the deed after signing, before it can be registered (along with the summary that will constitute the registration application), which in many cases must be completed in order to proceed with the closing or the disbursement of funds. The risk this delay poses to a transaction should be further considered in determining whether title insurance protection may be appropriate or available to mitigate the risks in the circumstances.
In the residential market, although the use of French is already more prevalent due to rules already in place, promoters, builders and developers will need to be even more vigilant when using English in their legal documents with residential tenants/purchasers, in order to properly document the express intent of the parties to use English, in addition to the translation issues described above and the rules applicable to adhesion contracts. For example, an immovable purchase agreement (including a unit of an immovable held in co-ownership) that is a contract of adhesion, regardless of its residential use or the number of dwelling units in the building, must be written in French, unless the parties have expressly agreed that it be drafted in English and, as of June 1, 2023, a French version of the agreement has been previously provided to the adhering party.
In Quebec, commercial leases are generally not registered in the Land Registry in their entirety, but by way of a short-form notice of lease pursuant to section 2999.1 of the Civil Code of Quebec, which contains only certain terms of the lease. The new rules under the Act require that such a notice of lease (as of September 1, 2022) be drafted and registered in French, even if the lease itself is drafted in English. That said, no certified translation will be required.
- Short Form Deeds: Parties wishing to transact in English may want to consider drafting a deed in a simplified format that would be used for registration purposes. This short form deed would contain only the statements required to render their rights enforceable against third parties, but would refer to unregistered agreements for the determination of the parties' other rights and obligations. The unregistered documentation would not require translation, unless they constitute contracts of adhesion, as explained above. This solution will be useful for deeds of sale and hypothec, but may not apply to all cases, such as more complex servitudes. This practice is similar to form practice registration, that is, registration by filing a form containing a summary of the particular terms of the transaction (a method used in many other jurisdictions).
- Standard Formats: Another solution, for any deed drafted and executed in French that must be registered in the Land Registry, would be to prepare and provide the parties with an English translation of the draft deed prior to the execution of the deed for information and reference purposes only. In the case of a standard form mortgage where the creditor already has an English version of the standard form in French, this could be the version that would be provided to the grantor. This approach would ensure that the grantor understands what they have signed in French, rather than binding the parties to the English version.
We anticipate that the Land Registry will be providing further details on the application of the Act. We will be following these updates closely. We remain available to discuss with you the impact that these new provisions will have on your real estate transactions in Quebec.