May 30, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XLVIII of a Series –Litigation part 8
Post XLI started an in depth look at power of sale litigation. In the previous Post XLVII I explained that I prefer to keep my statements of claim simple and straightforward, and not include in the amounts being claimed any of the costs that have been incurred by the mortgagee under the power of sale. There are a variety of reasons for this position.
One undeniable reason is that when mortgage defaults are rampant and there are many power of sale files to process, just including principle and interest in the statements of claim helps to standardize the claims, which makes their drafting and issuance quite a bit more efficient. But that is not the main reason why I do not add costs to the claims that I issue. The main reason for this tact is that many power of sale claims (if not most) are not defended by the mortgagors, who choose not to file a statement of defense with the Courts.
When 20 days passes after the service of the mortgagee’s statement of claim, the mortgagee is entitled to file with the Court a requisition asking the Courts to give the mortgagee default judgment against the mortgagor. With one caveat, that the Court Registrar who is empowered to sign the default judgment has to be satisfied that the amounts claimed in the statement of claim are liquidated amounts. And a liquidated amounts has been defined by the case law as an amount that is easy to calculate.
The practical effect of this ‘liquidated amount’ rule is that every cost incurred by the mortgagee in the enforcement of its mortgage that is to be included in the statement of claim must be properly described and particularized in the statement of claim. That would require the statement of claim to (i) refer to the paragraph in the mortgage in default that authorizes the mortgagee to recoup each particular cost; and (ii) explain how the cost was incurred and (iii) quantify the amount of the cost. For example, the statement of claim might say that paragraph #8 (for example) of the mortgage in default requires the mortgagor to pay to the mortgagee any costs incurred by the mortgagee to insure the mortgaged premises. And the claim would then continue to detail how the mortgagee bought a policy of insurance from an insurer and itemize the exact cost of such insurance. That would prove to the Court Registrar that that cost was liquidated, which would allow that Registrar to sign default judgment. And so on and so forth for each cost incurred and included in the statement of claim.
Now don’t get me wrong, there is nothing the matter with doing just that, but it is a lot of extra work, and the benefit of the extra work is just not worthwhile, IMHO.
The next post will explain why there is no particular value to itemizing and particularizing costs in the statement of claim. And, 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 power of sale 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.