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Apr 20, 2020

THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part VI of a Series – Demand Letters – Some Details - 3 of 3

In the previous 2 blogs, I talked about demand letters generally. In this posting, I will delve into some demand letter details.

First and foremost, the demand letter must be clear and unequivocal. Your demand cannot be conditional. Demand letters that contain offers of settlement or suggestions of new finance terms are to be avoided at all costs. Save those letters for later. Let the demand letter stand alone.

The purpose of your demand is to let the mortgagor know that:

  • a default has occurred
  • what the mortgagor needs to do in order to cure the default
  • the time frame within which the default must be cured
  • that the mortgagee will enforce its rights and exercise its remedies under the private mortgage if the default is not quickly cured.

Your demand must be sent to:

  • all borrowers
  • all owners of the mortgaged property (not always the same as 'all borrowers')
  • all guarantors (if any)

Forgetting to send the demand to one of these parties can have unfortunate results, so take care to name everyone involved in your private mortgage loan transaction.

The demand letter can be sent by the mortgagee in a variety of ways. But be careful to check the fine print of your mortgage documents and commitment letter, because sometimes, these contracts tell you how notices (and demands are notices) are to be sent. Take extra care to always follow the exact terms and conditions of the mortgage contract.

Some typical ways to send the demand are:

  • registered mail – preferred because if delivered, there is a signature of the recipient on file
  • regular (snail) mail
  • email

I like to use all three methods. Always registered and snail mail and by email if an address is on file. And speaking of addresses, I send the demand letter to every address on file – I do not try to decide which is the best address. I send the letter to all addresses, which include the addresses:

  • in the loan application
  • on the commitment letter
  • on the deed to the mortgagors
  • on the mortgage in default
  • to the property address

One cannot make a mistake by sending the demand to too many addresses. But missing an address – especially if it happens to be the actual address at which the mortgagor in default is living, can have unfortunate consequences. No one wants to hear a mortgagor complain about not receiving a demand (and this is a very frequent complaint), only to discover that the mortgage lender did have the mortgagor’s correct address but failed or forgot to send the demand letter to that address.

The next posting should look at various mortgage remedies that are available.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.