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Nov 15, 2020

THE NEW REALITY: PRIVATE MORTGAGE LENDERS’ RIGHTS AND REMEDIES - Part XXX of a Series – A Post-Lockdown Review of Mortgage Remedies during a Pandemic - Part 5 of 5

Much to the misunderstanding of many in the industry, a court order or writ of possession os not required in order for a mortgagee to take possession of mortgaged property. Possession is a matter of contract. and virtually every mortgage gives the mortgagee the right to take possession on default. For example, Dye & Durham’s Standard Charge Terms 200033, which is used in many many private mortgages these days, sets out 3 separate clauses 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 or any of the them without any notice….". And 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 or any other person or persons whomsoever…..”. 

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. All that the mortgagee need do is become the mortgagee-in-possession of the mortgaged property. Which can occur by the mortgagee attorning rent or changing the locks. But what if the mortgaged property is tenanted and the tenant refuses to allow the mortgagee to change the locks?

The answer is fairly straightforward. Once a mortgagee attorns the rents, the mortgagee becomes the landlord of the residential property by virtue of section 47 of the Mortgages Act, R.S.O. 1990, c. M.40 . And section 24 of the Residential Tenancies Act, 2006, S.O. 2006, c.17 gives the landlord permission to change the locks on residential premises so long as the tenant is given a copy of the new key. So, it should be fairly simply for the mortgagee to change the locks on rental properties. ‘Should be simple’ - being the operative words. Sometimes, the tenant just says “no”.

This last October, I brought two separate motions seeking an urgent hearing allowing a mortgagee to change the locks and take possession of residential property when the tenant has refused to co-operate. The Brampton Court refused our request for an urgent motion date but gave us a regular motion date just 2 weeks after the motion was filed. We will see what the Oshawa Court will do…..

Time will tell. This is now…..our new reality.

The next blog post will continue a multi-part series unpacking Mortgage Remedy Litigation (which I started back in September of 2020). 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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