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Tag: lender

Can a borrower redeem their mortgage under power of sale?

The answer to this question is constantly evolving, with new and conflicting case law addressing specific facts released almost yearly.  The old adage of being able to redeem your mortgage (payout your mortgage) during a power of sale proceeding so long as the mortgagee in possession (being the seller) has not yet entered into a firm or unconditional agreement of purchase and sale with a buyer is no longer clear cut.Today the way I understand it is that there are two issues once the mortgagee in possession (being the seller/mortgage lender) enters into an agreement of purchase and sale with a potential buyer, and whether or not the borrower/mortgagor can still redeem (payout) his mortgage and keep his property:Agreement of purchase and sale has conditions that must be satisfied prior to the agreement becoming “firm”; and

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Issues in Mortgage Law

Foreclosure: When and Why?It is not uncommon to combine a claim for foreclosure with a claim for the amount due under the covenants contained in the mortgage. Thus, an action for foreclosure is for the recovery of the mortgaged property itself and is a means by which the mortgagor’s equity of redemption is ended, so that the mortgagee may realize on the security without later having to justify the sale price or to account for the sale proceeds.In Toronto, and quite a few other jurisdictions in Ontario, the foreclosure process takes place as a reference pursuant to Rules 54 and 55 of the Rules of Civil Procedure. Besides this, Rule 64 has specific application to foreclosures and sale actions. When a choice is made between power of sale or foreclosure, there are several issues to consider. Such considerations are:  whether the mortgagee is an institutional or private lender; whether there are any subsequent encumbrancers or execution creditors and whether they are private or institutional;

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Mortgage Enforcement: Issues for Discussion

IntroductionCommon issues expected to arise and confront legal counsels in mortgage enforcement practice, whether from the mortgagor’s perspective or from the lender’s perspective are under discussion here. Divided into ten sections, each of which addresses a discrete point, the purpose is to assist counsels in identifying the relevant issues, the common problems, and the usual solutions.Entitlement to 3-Months InterestAccording to Section 17(1) of the Mortgages Act:“Despite any agreement to the contrary, where default has been made in the payment of any principal money secured by a mortgage of freehold or leasehold property, the mortgagor or person entitled to make such payment may at any time, upon payment of three months interest on the principal money so in arrear, pay the same, or the mortgagor or person entitled to make such payment may give the mortgagee at least three months notice, in writing, of the intention to make such payment at a time named in the notice, and in the event of making such payment on the day so named is entitled to make the same without any further payment of interest except to the date of payment.”

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The Lesson Learned from a Leasing Arrangement

In the previous installment, we reviewed a scenario when the lender can attorn rents and the tenant has to pay rent to the lender. Assuming that the tenant and lender have a non disturbance agreement and that the tenant chooses to stay and pays rent to the lender, the non disturbance agreement creates a monthly tenancy continuing as long as the tenant pays rent. With an existing non disturbance agreement, the tenant paying rent to the lender is not subject to an annual tenancy. Nor is the tenant bound by the original terms of the lease either. These are real benefits to the tenant, allowing the tenant to stay or go as it deems fit.However, a non disturbance agreement does not mean that the tenant has agreed to stay forever. There is always the option to leave. On the basis of the Goodyear case, the tenant can leave once the lender takes possession. So, the non disturbance agreement is one sided here. Opposite to this, an attornment agreement creates mutual obligations between lender and tenant. The tenant agrees to become the tenant of the lender and the lender agrees to become the landlord of the tenant, thus creating a tenancy stitching together both. It binds the lender to give the tenant possession and the tenant to pay rent.

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The Law of Lease Assignments

Earlier we have seen how Goodyear benefited from its lawsuit against Burnhamthorpe. This verdict is compared with the generally accepted good law set out in Corbett v. Plowden over one hundred years ago in Ontario. By asserting its paramount right to possession, Canada Life got the right to terminate the subsequent lease in favour of Goodyear and gave Goodyear the right to walk from its subsequent lease obligations. Such a result apparently is only possible when the mortgage has priority over the lease. So, the mortgagee would take title subject to the lease, if the Goodyear lease had priority.TenancyThe Goodyear lease was not terminated in December 1994 by Canada Life or Goodyear. Continuing as usual, Canada Life demanded rent, which Goodyear paid from January of 1995. Following the decision in Corbett v. Plowden, in the absence of an express agreement as to the term of the lease between the mortgagee and the tenant, the court could impose an annual tenancy on Canada Life and Goodyear, which could be terminated by six months notice. Thus, there was no dispute that the law in Corbett v. Plowden was good law in Ontario.

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ASSIGNMENTS OF LEASES, RENTS, NON DISTURBANCE AND ATTORNMENT: An Introduction

Leases and tenancies of a secured property are of great interest to a commercial lender for the following reasons:1. The borrower could pay the debt from the rent obtained from the tenant;2. For valuation of the property based upon a cap rate, the rent could be used as the basis;3. The rent would determine whether or not the borrower could liquidate the property to repay the debt or get replacement financing to repay the debt, namely the voluntary exit strategy;4. It would also indicate whether or not the lender could liquidate the property using mortgage remedies to repay the debt or could sell security to another lender, namely the involuntary exit strategy;

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