Sep 13, 2020
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XXV of a Series – Mortgage Remedy Litigation
As mentioned in a previous posts POST IX & POST X, a mortgagee has to make a fundamental choice of remedies at the get go; between foreclosure and power of sale. In a foreclosure action, the mortgagee aims to take ownership of the mortgaged property in lieu of having its debt repaid. In a power of sale action, the mortgagee looks to be repaid, hopefully from its sale of the mortgaged property.
If the foreclosure route is chosen, the process starts with the mortgagee issuing and serving a statement of claim for foreclosure in the Courts. If the mortgagee opts for the power of sale route, then the mortgagee can start the process by issuing a (non-foreclosure) statement of claim. Or the mortgagee can wait and issue the (non-foreclosure) statement of claim either before or if it choses to do so, after issuing a notice of sale. Or the mortgagee can decide not to issue a statement of claim at all. The choice of remedies and the order of enforcing those remedies is completely up to the mortgagee and, of course, only limited by the wording of the mortgage contract.
The statement of claim will typically contain 2 separate claims against the owner/mortgagor. Most common is the claim for the repayment of moneys owing under the mortgage debt. This is called a monetary claim. The other claim that can be combined with the monetary claim in the statement of claim, or that can stand on its own as the only claim in the statement of claim, is the mortgagee’s claim for possession of the mortgaged property. This is often called the claim for possession.
Issuing a statement of claim in a mortgage remedy action can serve many purposes. If the statement of claim is issued early in the mortgage remedy process, it can let the owner/mortgagor know that the mortgagee is serious about enforcing its mortgage remedies. It can serve as a form of demand for repayment. It can give the mortgagee a monetary judgment (that is, a judgment for moneys owing under the mortgage) which, in turn, can be used by the mortgagee to tie up and encumber the owner/mortgagor’s other real property assets (in addition to the mortgaged property). And a judgment for possession can be the first judicial step necessary for the mortgagee to obtain vacant possession of the mortgaged property from the owner/mortgagor.
Of course, the Mortgages Act and Residential Tenancies Act give lawful tenants security of tenure, meaning that the tenants of the mortgaged property cannot be evicted from the mortgaged property by a mortgagee, except in very limited and rarely used circumstances.
The next blog post will start a 5 part series reviewing mortgage enforcement issues that have arisen in this pandemic. And 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.