Jun 14, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XLIX of a Series –Litigation part 9
Post XLI started an in depth look at power of sale litigation. In the previous Post XLVIII I explained why I choose to not include any of the costs that have been incurred by the mortgagee under the power of sale in the amounts being claimed in the statement of claim.
If one looks at this issue from a purely logical point of view, one quickly realizes that the quantum of costs incurred by a mortgagee will increase during the power of sale and mortgage remedy process. And therefore, if the statement of claim is the mortgagee’s first step in that process, there will be few costs incurred that could be claimed in the statement of claim. And conversely, if the statement of claim was saved for the end of the power of sale proceeding, there would likely be a fairly long list of costs that could be claimed in the statement of claim.
And it would be quite unfair for a mortgagee to receive a benefit or to suffer losses due to the timing of the issue of the statement of claim. That is why it is unnecessary for the mortgagee to list all costs incurred in the statement of claim. Because the mortgagee is always entitled to collect all mortgage remedy costs whenever incurred – before or after the claim is issue and before or after judgment is received.
In fact, almost every mortgage that I have seen contains a clause that says that obtaining a judgment for amounts owing under the mortgage does not operate as a merger of the covenants set out in the mortgage. This means that the mortgagor’s promise in the mortgage to pay the mortgagee’s costs incurred in enforcing the mortgage and in completing the power of sale continue to exist and be effective even after the mortgagee obtains a judgment from the courts. Dye and Durham’s standard charge terms 200033 has the following clause at paragraph 20, just by way of example:
"The taking of a judgment or judgments on any of the covenants herein shall not operate as a merger of the covenants or affect the Chargee's right to interest at the rate and times provided for in the Charge;"
So, the mortgagee can sue the mortgagor at any time during the power of sale process and need not include any mortgage enforcement or mortgage remedy costs in the claim. The next post will examine guarantors under the mortgage in the context of power of sale litigation. But 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.