In the previous 2 post, I reviewed (not too harshly, I hope) an unusual letter that I received from a lawyer acting for a mortgagor just after the mortgagee changed the locks and took possession of his clients’ residential rental property. In this letter, the mortgagors’ lawyer warned me that “any steps taken by the mortgagee to disturb or obstruct the owners’ “rightful possession” [of the mortgaged property] without a court order will be a “violation of [the] owners’ legal/charter rights and be actionable in the Court of Law”.
My goal in this post is to dispel the all too common misbelief that a mortgagee can only take possession of residential property if the mortgagee first obtains a court order permitting it to do so. That is simply not the law in Ontario, where the common law has long condoned what is called self-help mortgage remedies. Meaning that a mortgagee can issue a notice of sale, take possession of mortgaged property and sell that property; all without any court involvement at all.
A mortgagee’s ability to take possession of mortgaged property without a court order stems back to the centuries old origins of mortgage law, when the granting of a mortgage was accomplished by the mortgagor actually giving the deed to the mortgaged property to the mortgagee. Historically, the delivery of the deed to the mortgaged property was accompanied by the delivery of possession of the mortgaged property. Somewhere in the annals of time, mortgages started containing clauses allowing the mortgagor to keep possession of the mortgaged property until default. And only after default, was the mortgagee entitled to possession of the mortgaged property. This practice continues to this day.
My client’s mortgage (Dye & Durham’s Standard Charge Terms 200433) contains 3 separate permissions allowing the mortgagee to take possession of the mortgaged property following default. The first is a clause which says that “The Chargee on default of payment for at least 15 days may, on at least 35 days’ notice in writing given to the Charge, enter on and lease the land or sell the land.” These standard charge terms go on to state that “Provided further, that in the case default be made in the payment of the principal amount or interest or any part thereof and such default continues for two months ……then the Chargee may exercise the foregoing powers of entering, leasing or selling any of the them without any notice….. “. Lastly, these standard charge terms then clarify that “Upon default in payment of principal and interest under the Charge. …..the Chargee may enter into and take possession of the land hereby charged ………..[whereupon] the Chargee shall enter into, have, hold, use, occupy, possess and enjoy the land without the let, suit, hindrance, interruption or denial of the Chargor…..
And so, with the mortgage contract clearly giving the mortgagee the right and full power to take and keep possession of the mortgaged property upon the mortgagor’s default, without the suit or hindrance of the mortgagor, no court proceeding and no writ of possession is needed in order for the mortgagee to do so.
Lastly, the notion that anything that the mortgagee does or can do being a violation of the mortgagor’s charter rights simply highlights the reality that the author of this letter has never read Canada’s Charter of Rights and Freedoms. For if the author had done so – she or he would have realized that the Charter protects citizens from certain governmental action – but was never intended to and does not affect in any manner at all private contract rights between 2 or more parties.
More about issuing statements of claim and prosecuting legal action following mortgage default in the next post. 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.