Apr 03, 2022
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LXIX of a Series – Ask Me Anything Part 3…
In the previous ‘power of sale’ blog LXVIII posted last month, I continued a multi-part AMA – Ask Me Anything - series. I wrote that minor typographical errors in names and legal descriptions set out in a notice of sale that do not cause confusion – and which allow the mortgagor to know which of her or his mortgages is in default – should not invalidate the notice of sale.
In this blog, I’ll look at a thornier issue, which is how the courts treat errors in the amounts claimed to be owing in the notice of sale. Of course, there is no definitive answer. We are talking about the law here – and if the law was not often murky and unclear, mortgagors and mortgagees would not have to hire lawyer, would they?
The common law starts with the premise that strict compliance with the legal requirements for the exercise of a power of sale is always required. However, over time, this strict rule has softened by having the Courts look at substance over form. Minor, non-confusing, irregularities ought not invalidate a notice of sale. So while accuracy is still the gold standard, the courts have tolerated errors that do not detract from the purpose of the notice of sale. The degree of accuracy has never been quantified, but the standard, according to the Court of Appeal, is evolving toward a standard of commercial reasonableness.
That said, serious errors in the amounts claimed to be owing will still invalidate the notice of sale. Recently, the Court of Appeal cited with approval an older case that invalidated a notice of sale that included a 5% overstatement of the mortgage debt ($221K overstated debt on a $4.7M mortgage). So, perhaps, one might be able to argue that if a notice of sale contains errors in the amount of the debt owing, if the errors are less than 5% of the mortgage debt, the notice of sale might be valid, while conversely, if the errors exceed 5% of the mortgage debt, the notice of sale might be invalid. But this last statement is a gross oversimplification, of course. And commercial reasonableness will be applied by the Courts.
Remember, 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 power of sale and mortgage default 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.