A boutique Toronto law firm serving
clients across Canada since 1987

Dec 20, 2020


Back in September of 2020 – just before the pandemic's 2nd wave hit hard, I received a call from a new client who had 2 private mortgages registered on 2 properties owned by the same borrower that were each in default. One property was a duplex in downtown Toronto that had been renovated and split into 4 units and was being advertised as an AirBNB rental. The other was a condominium unit, also in downtown Toronto, which was being rented. I gladly took on this new retainer.

I recommended to my client that we start with a demand letter. And if the demand did not result in a quick repayment, that we immediately take possession of the units and list them for sale on the MLS. I thought that that strategy might get my client repaid both quickly and efficiently. However, I was unprepared for what happened after the demand letter was ignored by the owner in default.

I sent a property manager to both properties to change the locks and try to take possession. What I discovered, was that:

  • there is a real and pervasive misconception among real estate professionals that a mortgagee cannot take possession of residential property without first obtaining a court order. This is simply not correct – a court order is not required for a mortgagee to take possession so long as the terms of the mortgage are being followed closely and so long as the mortgagee does not breach the peace when taking possession
  • property managers and bailiffs alike will change the locks on an external door of a unit that appears vacant (which is perfectly legal) but are loathe to do so when there is an external door with shared access and in addition an internal door to the mortgaged unit to also be breached
  • a court order might very well be needed as a practical consideration when trying to get a condominium corporation to give the mortgagee’s property manager access to the inside of the condominium building so that the lock on the mortgaged unit’s door can be changed and possession secured

Bottom line, the property manager did not take possession of the units. A couple of weeks had passed and I was no further ahead, except that the borrower/mortgagor knew that he had won the first battle, and had successfully prevented the mortgagee from getting possession of his 2 properties.

The next blog post will be a continuation of this real-life mortgage remedy saga. 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.