What is taking possession for the purposes of administration?

The Civil Code of Quebec gives the right to the creditor holding a hypothec on the property of a business to take temporary possession of the hypothecated property and to administer it or to delegate its administration to a third party.

The creditor, or the one to whom he has delegated the administration, then acts as administrator of the property of others in charge of full administration.

Taking possession for the purposes of administration does not authorize the creditor who takes possession to liquidate the business, he must continue the operations because he has the obligation, at the end of taking possession, to render account of his administration and return the property in his possession to their owner against whom the hypothecary right has been exercised.

The creditor who, because of the efficiency of his administration, obtains payment of the debt, must return, in addition to the property, any surplus remaining in his hands after payment of the debt, the expenses of administration and the costs incurred to exercise the possession of the property.

This remedy could interest a creditor who finds that an immovable property which was given as security is badly maintained or poorly exploited. The creditor can also have reasons to believe that the debtor does not use at first the income from the immovable property for its maintenance or the services to be supplied to the tenants. By taking possession of the property for the purposes of administration, the creditor will have a ringside seat to acknowledge personally what is taking place and, on one hand, to straighten the situation or, on the other hand, to choose in full knowledge of the facts another hypothecary remedy.

On the other hand, a creditor unfamiliar with the management of an immovable property should, in such a case, show himself extremely careful and consider another hypothecary remedy.