Jul 11, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LI of a Series - Personal Guarantees part 2
In the previous Post XL I started thinking about the personal guarantees sometimes found in mortgages. I explained that a mortgage contains both a promise to pay (not unlike a promissory note) and a mortgage also contains a charge of land.
The promise to pay in a mortgage is given by the owners of the property at the time that the mortgage is signed and registered. That is a requirement of law – under the Land Titles Act to be exact. A mortgage is not valid unless signed by each registered owner of the mortgage property. When a third party is also requested or required to agree to pay the mortgage debt (in addition to the mortgagor(s), that third party is added to the mortgage as a guarantor.
The front page of a mortgage has a pre-printed spot to name any guarantor under the mortgage. But details of the terms and conditions of the charge are needed in order to set out the scope and extent of the guarantee in question. For example, Dye and Durham’s standard charge terms 200033 sets out in paragraph 24 a set of guarantee terms that become operative if a guarantor is named on the first page of the charge wehen those standard charge terms are also employed.
There are 2 vitally important things for every mortgagee to remember when dealing with a charge that is guaranteed. First, whenever a demand or other notice is sent to the mortgagor or mortgagors, that demand or notice must also be sent to the guarantor. This especially includes demands on defaulta and also notices of sale under power of sale. And second, if the consent of a mortgagor or mortgagors is needed, say; to a renewal or to an amendment of the mortgage, then the guarantor must also provide her or his consent.
Failure to comply with these 2 simple obligations with almost certainly terminate the guarantor and allow the guarantor to walk away from her of his guarantee obligations and responsibilities. The onus is placed squarely on the shoulders of the mortgagee. The mortgagee must notify the guarantor whenever a notice is required to be given to the mortgagor or mortgagors and the mortgagee must get the guarantor to sign amendments and renewals, etc if the mortgagor or mortgagors are also required to sign off.
Next post will look at some of the important terms to include in a guarantee. 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.