Introduction
Can a right of first refusal in a lease-purchase agreement published in the Land Register block a receivership sale? In Séquestre de Centre de vacances et d’apprentissage loisirs de Saint-Cyprien, the Superior Court ruled that the tenant’s right could not prevent the transaction proposed by a receiver appointed under the Bankruptcy and Insolvency Act (the “BIA”).
In its judgment handed down July 10, 2026, the Court considered the personal nature of the rights at issue and how enforcing them would affect the realization of assets for the benefit of creditors. It approved the sale and ruled that certain provisions of the lease-purchase agreement were unenforceable against the buyer, including those relating to purchase rights and the right of first refusal.
A sale process involving emphyteutic rights
On July 30, 2025, at the request of the principal secured creditor, the Court appointed a receiver over the debtor’s assets. These assets consisted primarily of emphyteutic rights, a type of right under civil law similar to a long-term leasehold interest at common law. The appointment order authorized the receiver to proceed with the sale of the assets, subject to the Court’s approval.
Following a public bidding process, two offers were received, including one from the tenant. The receiver accepted the offer from the other potential buyer, which it considered more beneficial to the creditors.
The tenant invokes his lease-purchase agreement to challenge the sale
The tenant opposed the motion for approval of the sale on two main grounds. He argued that:
- the sale process was not sufficiently transparent because the solicitation documents did not expressly disclose the lease-purchase agreement published in the Land Register. In his view, this omission compromised the integrity of the process;
- the rights under the lease-purchase agreement were enforceable against the receiver. The receiver therefore could not proceed with a sale without allowing him to fully exercise his rights under the lease.
The Court upholds the sale process and sets aside personal rights
The Court first found that the receiver had conducted the sale process in a sufficiently fair, transparent, and diligent manner.
It noted that the lease-purchase agreement had been published in the Land Register since 2010, and any interested party could have reviewed it as part of their due diligence. Nothing in the evidence showed that the absence of an express reference to the lease had affected offer prices or discouraged potential buyers.
The Court then turned to the main issue: the rights invoked by the tenant. It noted that a right of first refusal or an option to purchase is a personal right, not a real right enforceable against third parties.
Even when published in the Land Register, this type of right remains contractual in nature. It does not confer on its holder a real right that follows the property when ownership changes.
The Court therefore held that the rights under the lease-purchase agreement could not prevent the receiver from exercising its power to sell under the appointment order and the BIA.
Implications for contractual rights holders
This decision continues the trend in the case law of prioritizing effective asset realization under the BIA. It highlights that contractual rights, such as options to purchase and rights of first refusal, remain personal in nature even when they are published. If they threaten the orderly realization of assets in insolvency proceedings, courts may declare them unenforceable to preserve the value of the assets and protect creditors’ collective interests.
This ruling is a useful reminder that publishing a contractual right in the Land Register does not necessarily make it a real right enforceable against a court-supervised sale.
Confidentiality of the bidding process
The Court also emphasized the importance of keeping documents related to the bidding process under seal or confidential. Their disclosure could compromise the integrity of the sale process and harm both creditors’ economic interests and bidders’ legitimate business interests. These risks are particularly relevant if the proposed transaction falls through and a second bidding process is needed.
An important distinction from common law
There is an important distinction between Québec civil law and the common law of other provinces. Under common law, an option to purchase can create an equitable interest in the property from the outset. A right of first refusal, although initially a personal right, can become an equitable interest when triggered by the receipt of a valid third-party offer. Where such an interest exists, the question is not simply whether it is enforceable, but whether the court can and should extinguish it through a vesting order. Under Québec law, the Court need not determine whether a genuine real property right can be extinguished in exceptional circumstances. It need only find that these contractual rights are unenforceable against the receiver and cannot prevent the receiver from exercising its power to sell.
Publishing the lease does not settle everything
Publishing a lease in the Land Register does not guarantee the protection afforded by its terms. In this case, the right of first refusal and the option to purchase remained personal rights and could not prevent the receiver’s sale.
The judgment reminds rights holders to look beyond mere publication and consider how these rights apply in an insolvency context. The distinction from common law underscores that this analysis must account for the applicable legal framework.