Real estate law is there to protect both borrowers and lenders in case anything goes wrong. Mortgages aren’t the exception. There’s a reason why the mortgage contract is still popular after all these years.
One of the reasons why lenders are comfortable with the mortgage option is because of a law. It’s called “mortgage enforcement.” In a nutshell, it ensures that everyone involved in the contract complies with the guidelines established there.
Mortgage enforcement helps in many situations, including when working with a commercial property management company. It ensures that mortgage payments always go through and that there are provisions in place if the borrower doesn’t follow the rules.
We’ll help you understand what mortgage enforcement means in Ontario law. If you’re interested in other topics about property management, searching for fair market value, or others, don’t hesitate to check out our blog.
Understanding Mortgage Enforcement in Ontario
It’s uncommon to see a case of “defaulting” in Ontario, but it can happen. Defaulting happens when someone breaches one or more terms of an agreement.
Let’s say that the borrower has a mortgage debt. That would be a way of defaulting. When a borrower defaults, the lender has some remedies to protect themselves. By remedies, we mean legal actions.
All parties should take legal advice during the process to avoid any conflict. Each province in Canada has different rules and regulations, so it’s better to have an expert by your side to tell you what’s happening.
Some people often get in trouble because they don’t understand their rights. This is completely avoidable by educating yourself and looking for legal counsel.
Who Governs Mortgage Enforcement in Ontario?
Three legislation/regulations govern mortgage enforcement in Ontario:
Land Titles Act (LTA)
Through the LTA, lenders can handle the power of sale process. Essentially, they can sell their property without involving a court. The act sets out the guidelines for selling the mortgaged unit.
Land Registration Reform Act (LRRA)
It protects mortgages against third parties.
Mortgages Act
The Mortgage Act in Ontario sets all the rights and guidelines that parties must follow for a healthy relationship. It also covers what steps to follow in case defaulting happens.
Which Remedies Does a Lender Have Available?
Lenders have enough protection thanks to mortgage enforcement and can be mediated through a lawyer. Let’s look at some of the most common ones:
Power of Sale
The power of sale is a legal provision. It allows a person to sell a property used as collateral if a borrower doesn’t fulfill the mortgage terms. If the borrower doesn’t pay their outstanding debt in time, for example, the lender would have the right to issue a “Notice of Sale.”
Let’s talk more about the process:
You could start a power of sale proceeding as soon as the borrower fails to make one payment of the mortgage. It’s also possible to start it if they breach other clauses of the contract.
Although it’s not required by law, you can contact the borrower and ask them to cure the default immediately.
The lender starts by issuing the “Notice of Sale” 15 days after the homeowner misses the payment or breaches the contract. They can serve it either personally or through mail. Ontario’s Mortgages Act specifies that the notice must include the:
- Property’s information
- Amount due
- Interests
- Sale date
Borrowers often have a redemption period of 35 days to pay their entire mortgage debt plus any extra costs related to the default.
What if they fail to meet the deadline? The lender can issue a “Statement of Claim” and proceed with a sale. Any proceeds from the sale will pay off the mortgage debt and its fees. Any surplus from the deductions will return to the borrower.
Judicial Sale
The judicial sale is slightly simpler. It’s a court-ordered sale of a unit to pay for debt. When someone defaults on the mortgage agreement or fails to cure the issue, the lender can initiate the process.
Foreclosure
During a foreclosure, a lender can acquire legal property ownership through a civil court. Then, they can sell it on the open market and keep the money for themselves. Unlike the power of sale, the lender gets full ownership of their unit.
Although it may seem like a more attractive option, a foreclosure doesn’t always result in a quick sale, whereas the power of sale provision focuses on giving the lender their money back as soon as possible.
What If the Borrower Thinks the Notice Was Unjustly Given?
Some borrowers may challenge the lender’s claim for many reasons. Usually, they’ll think it’s unfair.
The borrower has to prove to a judge that the “Notice of Sale” is invalid/defective to seek an injunction. If they’re not able to do this, they will still have to pay what they owe or face legal consequences if the lender takes action.
Mortgage enforcement law protects both parties at all moments. However, it also ensures that lenders don’t have much to lose if the borrower decides to stop paying or break contract clauses.
Why Getting Legal Help Will Help You
It’s easy to get overwhelmed by legal stuff during mortgages. Not understanding your rights and obligations often leads to unnecessary conflict.
Most of the time, you can avoid said conflict by hiring a mortgage enforcement lawyer. They’ve studied the law in your province and know how to make your rights count. Also, they can be the perfect mediator during a conflict.
Property management goes beyond collecting payments and keeping your unit in check. Understanding legal matters will also take you a long way. Getting some legal help during the process won’t hurt.
These experts will take a look at the contract, talk to all the parties involved, and discuss all the options available to solve the issue.
Bottom Line
At Maximum Property Solutions, we have all the tools you need to make the most out of your rental experience. Whether you’re a landlord or tenant, we’ll make your journey much more comfortable.
We’re your best option to invest in Windsor, Ontario. If you want to learn more about property management, the real estate market, or legal matters, check out more posts from our blog, or get in touch with our team.
