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Tag: mortgagee

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: What Can Go Wrong?

Notice of Sale and RequisitionsIf a purchase is made under power of sale, it is necessary to ensure that the vendor is authorized to conduct the sale and that the power of sale proceeding has been properly commenced. A requisition, in this respect, by purchaser’s legal counsel is expected to bring forth a statutory declaration attaching evidence of service of the notice of sale.  The usual practice is to attach to the statutory declaration evidence of service of the notice of sale by registered mail, including the registered mail receipts. The Court of Appeal ruled in CIBC Mortgage Corp. v. Chopra that service by registered mail to the address provided for in the mortgage would be quite adequate for the purpose.Typical Schedules to APSVendors of properties under power of sale more often than not include a schedule to the agreement of purchase and sale which significantly alters the usual terms of a sale/purchase transaction.

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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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Resulting and Constructive Trusts: Damages and Vesting Orders

Damages and Vesting Orders in Lieu of Constructive TrustThe Ontario Superior Court of Justice in McLean v. Danicic et al. discussed an application by a common law wife for a declaration of a constructive trust over two properties owned by the respondent, who is the common law husband, because of unjust enrichment. The wife was awarded damages and vesting orders over the two properties so as to secure the debt, considering the respondents’ history of failing to comply with court orders and his strenuous efforts to defeat the applicant’s claim.The fighting couple, Traci McLean and Darko Danicic began a romantic relationship in the summer of 1998 and were living together by Christmas. Traci got an engagement ring from Darko and they were working intensely to renovate a property bought by Darko just before he met Traci.

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A Discussion about the Assignment of Leases

As the Goodyear case considered in-depth assignments of rents and leases to determine the impact on the doctrine of privity, it is necessary to discuss the assignment of leases for several reasons.The court observed that a collateral assignment of the benefits of a contract as security for a mortgage did not result in the mortgagee assuming or becoming liable for any of the obligations under the contract. As the benefits of the contract are a chose in action, they are assigned to the lender for the sole purpose of enabling the lender to assert a right to receive the benefits through legal process. There could be no privity of contract between the non-assigning party to the contract and the assignee/lender because the obligations under the contract were not assumed by the lender.Reading the verdict, at page 329, Madame Justice McKinley states:“Although the assignment is specifically stated to ensure to the benefit of and be binding on successors and assignees of both the mortgagor and the mortgagee, that provision adds nothing to the rights and obligations of the immediate parties and cannot expand in any way the rights and obligations of their successors and assignees.”

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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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MORTGAGE DEFAULT: Power of Sale or Foreclosure?

Although generally the real estate market in Ontario has been robust, the frenzied market of the past has caused an increase in mortgage defaults as a result of an overall weakened economy and a tighter lending market.  Many clients of Levy Zavet PC are both lenders (“mortgagees”) who make investments in mortgaged property and borrowers (“mortgagors”) who are making real estate investments.  When

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