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Sep 06, 2020

THE NEW REALITY: PRIVATE MORTGAGE LENDERS’ RIGHTS AND REMEDIES - Part XXIII of a Series - Taking Possession of Rented Residential Property – part 2 of 3

In the last post, I told my readers that I acted for a mortgagee who had just taken possession of rented residential property. A fairly common mortgage remedy step – but one that resulted in my receipt of an enigmatic letter from the owners’ lawyer who stated that his clients owned the property (and I paraphrase)

  • are in “lawful possession” of the property
  • and that any steps taken by the mortgagee to disturb or obstruct the owners’ “rightful possession” without a court order will be a “violation of the owners’ legal/charter rights and be actionable in the Court of Law”

I mentioned in the last post that this letter indicated that the author seems confused about various basic real property, landlord and tenant and other legal principles. So, let’s begin by unpacking what it means for the owner of real property to be in possession of that property.

In Ontario, when we say that someone is the owner of real property, what we are alluding to is that in law, this owner has purchased or otherwise acquired a bundle of rights relating to the piece of land in question, all of which rights taken together results in her or his absolute ownership of the real property. These rights include the right to

  • occupy and live in the property – or put more formally, to be in possession of the property
  • allow others to use the property either by giving a license (temporary permission) to use the property or by granting a lease of the property
  • develop and build upon the property
  • farm the land
  • sell the property
  • bequeath the property upon death

In order to grant a lease of real property, the owner must give the tenant exclusive possession of the property for a clearly spelled out term. These 2 factors, exclusive possession and a ‘term certain’ are necessary preconditions to any lease of land.

So in the letter that I received, the author appears to have misunderstood land ownership and leasing law when he wrote that his owner/clients are in “lawful possession” of the property. This is clearly not the case, because when the owners rented out the property to the tenants, the owners gave exclusive possession of the property to their tenants in order to create the lease and to create their landlord and tenant relationship.

When the mortgagee changed the locks on the property and gave the tenant the new key, that rather symbolic action indicated the mortgagee’s clear intention to prevent the owner from taking back possession of the property from the tenant at the expiry of the term of the lease. And upon doing so (as I mentioned in Blog XXI) the mortgagee became the mortgagee-in-possession of the mortgaged property.

This misunderstanding of possession was again evidenced when the author of the letter stated that any steps taken by the mortgagee to disturb or obstruct the owners’ “rightful possession” will be a violation of the owners’ legal/charter rights and be actionable in the Court of Law”. Because, of course, the owners do not have ‘rightful possession’ of the mortgaged property that the owners have rented out to tenants.

More unpacking self-help issues, and 'the alleged violation of the owners’ legal/charter rights' in my 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.

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