My previous blog posts HERE and HERE introduced a retrospective review of mortgage remedies during the Covid-19 pandemic, focusing on institutional mortgage default. This post is a continuation of that theme, but looking instead at private mortgages.
Private mortgage lenders are not subject to OSFI regulations and requirements, and do not have to account for mortgage defaults in their financial statements as strictly as do OSFI regulated institutions. Nonetheless, many took a back seat last Spring and either formally or informally, allowed their mortgagors the same deferral options that were offered to insured mortgagors. Some private mortgagees made forbearance arrangements with owner/mortgagors and others just relaxed their mortgage enforcement for a few months. But by September, I was seeing an influx of new mortgage enforcement files in my office from private mortgagees. It was, for the most part, a return to business as usual.
At this stage of the pandemic, one must remember that the province’s Emergency Order on March 16, 2020, that suspended all time periods in the Rules of Civil Procedure (including the twenty days for the delivery of a statement of defense by a defaulting mortgagor) had come to an end effective September 14, 2020. So it is now theoretically possible, in mortgage recovery actions, to note defendants in default and obtain default judgments, if defendants do not serve and file a statement of defense within the twenty day time period set out in the Rules of Civil Procedure. I say 'theoretically' because many Courts are simply not accepting over the counter requisitions for default judgment. Hopefully, this will only be temporary.
But, of course, no one yet knows what the current wait time will be between the filing of a requisition for default judgement (when they are again accepted by the Courts) and obtaining default judgment signed by the Registrar of the Court. Nor is it clear whether the Courts will entertain electronic motions for summary judgment where a defendant has not filed a defense. Again, only time will tell. And no doubt different Courts around the province will have different wait times and very different attitudes about helping mortgage lenders enforce their mortgage security during the pandemic.
And this is where the story takes an unexpected twist. When their mortgages go into default, private mortgage lenders want their counsel to push ahead, take possession of the mortgaged property and then sell the mortgaged property. The law allows private mortgage lenders to take possession. Either by enforcing a writ of possession obtained from the Courts, or by using the self-help remedy of taking possession peacefully. However, with the Courts not yet being a reliable source for writs of possession, the self-help remedy is even more appealing than it was previously.
Of course, no mortgagee can forcefully take possession of another's property without a court order if the mortgagee were to be required to breach the peace. This is a reasonable and fair limitation on the self-help remedy of taking possession without a Court order. Owner/mortgagors can therefore refuse to give up possession to her or his private mortgage lender by simply refusing to leave the mortgaged property. But what about tenants? More about taking possession of tenanted residential property next time.
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.