May 20, 2020
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XII of a Series – Issuing the Notice of Sale
Your mortgagor / homeowner did not make the monthly mortgage payment that recently fell due. Another has allowed her or his real property taxes to accrue and remain unpaid despite demands for payment from the municipality. Once the private mortgagee has determined that starting mortgage enforcement proceedings is the best way to get the mortgage repaid, the mortgagee expects to see that a notice of sale is to be issued by counsel right away.
Not so fast, I admonish. There are a few things to check out before rushing to issue the notice of sale. First, does the mortgage document (including the standard charge terms) set out sale provisions? If so, those sale terms ought to be reviewed in detail. The mortgagee’s lawyer also has to double check a number of factual matter including, in no particular order
- has a default occurred? and if so, when?
- was a demand letter needed and if so, did a demand letter go out?
- has the default continued for more than 15 days (as required by the Mortgages Act)?
- is one of the mortgagors a farmer (evoking the Farm Debt Mediation Act notice requirement)
- although almost never relevant when the property is an owner occupied home, section 244 of the Bankruptcy and Insolvency Act may require a separate notice in intent to enforce security if the home is a business (rental) asset
- has the mortgagor requested a statement of the amounts owing under the private mortgage? The statement has to be delivered before the notice of sale is issued
Once these questions are answered, the lawyer is ready to issue the notice of sale. Although the notice of sale is prescribe by statute, the form can be amended according to the Ontario Interpretation Act.
The notice of sale has to be in writing. It must be signed by or on behalf of the mortgagee. And it must be given to the original mortgagor and to the current homeowner and to everyone who has a subordinate interest in the mortgaged property including lower ranking mortgages and execution creditors. To any guarantors as well. And to the spouse of the homeowner
Generally, the notice of sale is to be sent by registered mail. Personal delivery is rare, but permitted. And at least 35 days’ notice is to be given before the mortgagee has the ability to sell. That’s 35 ‘clear’ days, according to case law. Meaning that the day that the notice is sent is not counted in the 35 days, nor is the final day. And so the 35 day notice period is actually 37 days in total.
This notice period is sometimes called the redemption period. Meaning it’s the statutory imposed waiting period during which the homeowner/mortgagor may redeem the mortgage by repaying all amounts owing to the private mortgagee that are secured under the mortgage.
Next post will examine this redemption period and the do’s and don'ts during the redemption period. As always, this blog is intended for information purposes only. It is not legal advice and cannot be relied on as such. Nor is it a substitute for hiring your own legal counsel, who will be an essential member of your mortgage default and mortgage remedy team. And lastly, this blog is just my opinion. I reserve the right to change my mind. And I reserve the right to be wrong.
Be well and stay healthy.