Do you think that the law provides adequate protection for the mortgagor when the mortgagee is seeking to exercise its power of sale?
Definition of ‘Power of Sale‘
A clause written into a mortgage authorizing the mortgagee (lender) to sell the property in the event of default, in order to repay the mortgage debt. As a mortgage term, power of sale is equivalent to the term foreclosure.
“Policy No.PL 2.05.02 Date Issued February 11, 1997 ’’
RIGHTS AND OBLIGATIONS OF MORTGAGORS AND MORTGAGEES
2. Obligation on mortgagee to transfer instead of reconvening
(a)Despite any stipulation to the contrary, where a mortgagor is entitled to redeem the mortgagor may require the mortgagee, instead of giving a certificate of payment or reconvening and on the terms on which the mortgagee would be bound to recovery, to assign the mortgage debt and convey the mortgaged property to any third person as the mortgagor directs, and the mortgagee is bound to assign and convey accordingly.
(b).The right of the mortgagor to require an assignment belongs to and is capable of being enforced by each encumbrance or by the mortgagor, despite any intermediate encumbrance; but a requisition of an encumbrance prevails over that of the mortgagor, and as between encumbrance’s a requisition of a prior encumbrances prevails over that of a subsequent encumbrances.
“PL 2.05.01 (POL & PRO) Consent to Assign Leases, Transfer, Mortgage, or Charge Crown or Ministry Documents
Policy No.PL 2.05.02 Date Issued February 11, 1997
“R.S.O. 1990, CHAPTER M.40”
“Consolidation Period: From January 31, 2007 to the e-Laws currency date”
“Last amendment: 2006, c.17, s.252”
3. Right of mortgagor to inspect title deed
Despite any stipulation to the contrary, a mortgagor, as long as the mortgagor’s right to redeem subsists, is entitled, at reasonable times, on request, and at the mortgagor’s own cost and on payment of the mortgagee’s costs and expenses in that behalf, to inspect and make copies or abstracts of or extracts from the documents of title relating to the mortgaged property in the custody or power of the mortgagee.
4. Right of mortgagor to copy of mortgage
(a)Despite any stipulation to the contrary, within thirty days after receipt by the mortgagee of a mortgage executed by the mortgagor, the mortgagee or the mortgagee’s solicitor or representative shall deliver or mail or cause to be delivered or mailed a true copy of the mortgage to the mortgagor or the mortgagor’s solicitor or representative.
(b)If the mortgagee or the mortgagee’s solicitor or representative fails to deliver or mail or cause to be delivered or mailed a true copy of the mortgage to the mortgagor or the mortgagor’s solicitor or representative within thirty days after receipt by the mortgagee of the mortgage executed by the mortgagor as required by subsection (1), the mortgagor may, within ten days after the period of thirty days has elapsed, demand from the mortgagee a true copy of the mortgage, and, if the mortgagee fails to comply with the demand within ten days after receipt of the demand, the mortgagee is guilty of an offence and on conviction is liable to a fine of not more than $200. R.S.O. 1990, c. M.40, s. 4 (2).
(c) For the purposes of this section, a true copy shall include a facsimile as defined in section 1 of the Land Titles Act. 2000, c. 26, Sched. B, s. 14 (1).
“R.S.O. 1990, c. M.40, s. 2.
R.S.O. 1990, c. M.40, s. 3.
R.S.O. 1990, c. M.40, s. 4”
5. Powers of executors of mortgagee
Where a person entitled to any freehold land by way of mortgage has died, and his or her executor or administrator has become entitled to the money secured by the mortgage, or has assented to a bequest thereof, or has assigned the mortgage debt, such executor or administrator, if the mortgage money was paid to the testator or intestate in his or her lifetime, or on payment of the principal money and interest due on the mortgage, or on receipt of the consideration money for the assignment, may convey, assign, release or discharge the mortgage debt and the mortgagee’s estate in the land, and such executor or administrator has the same power as to any part of the land on payment of some part of the mortgage debt, or on any arrangement for exonerating the whole or any part of the mortgaged land, without payment of money, and such conveyance, assignment, release or discharge is as effectual as if the same had been made by the persons having the mortgagee’s estate.
a. Notice to mortgagee
The court may require notice to be given by advertisement or as may be considered proper to the mortgagee or those claiming under the mortgagee either before or after making the order.
6. Notice of sale
Goods and chattels distained by a mortgagee shall not be sold except after such public notice as is required to be given by a landlord who sells goods and chattels distrained for rent.
“R.S.O. 1990, c. M.40, s. 6”
“R.S.O. 1990, c. M.40, s. 5(a)”
7. Right to redeem after 5 years
(a)Where any principal money or interest secured by a mortgage of freehold or leasehold property is not, under the terms of the mortgage, payable until a time more than five years after the date of the mortgage, then, if at any time after the expiration of such five years any person liable to pay or entitled to redeem tenders or pays to the person entitled to receive the money the amount due for principal money and interest to the time of such tender or payment, together with three months further interest in lieu of notice, no further interest is chargeable, payable or recoverable at any time thereafter on the principal money or interest due under the mortgage.
(b)This section does not apply to any mortgage given by a joint stock company or other corporation nor to any debenture issued by any such company or corporation for the payment of which security has been given on freehold or leasehold property.
8. Mortgagee’s right of action
(a).In this section, “original mortgagor” means any person who by virtue of privity of contract with the mortgagee is personally liable to the mortgagee to pay the whole or any part of the money secured by the mortgage.
Right of mortgagee to recover personal judgment
(b).Despite any stipulation to the contrary in a mortgage, where a mortgagor has conveyed and transferred the equity of redemption to a grantee under such circumstances that the grantee is by express covenant or otherwise obligated to indemnify the mortgagor with respect to the mortgage, the mortgagee has the right to recover from the grantee the amount of the mortgage debt in respect of which the grantee is obligated to indemnify the mortgagor; provided that the right of the mortgagee to recover the amount of the mortgage debt under this section from the grantee of the equity of redemption shall as against such grantee terminate on the registration of a grant or transfer of the equity of redemption by such grantee to another person unless prior to such registration an action has been commenced to enforce the right of the mortgagee.
Limit of right of action
c).Where a mortgagee has the right to recover the whole or any part of money secured by a mortgage from an original mortgagor and also has a right by virtue of this section to recover from a grantee of the equity of redemption from a mortgagor, if the mortgagee recovers judgment for the amount of the mortgage debt against the original mortgagor.
“R.S.O. 1990, c. M.40, s. 8”
“R.S.O. 1990, c. M.40, s. 8(c)”
9. Powers incident to mortgages after default
Where any principal money is secured by mortgage of land, the mortgagee, at any time after the expiration of three months from the time of default in the payment of any money due under the mortgage or after any omission to pay any premium of insurance that by the terms of the mortgage ought to be paid by the mortgagor, has the following powers to the like extent as if they had been in terms conferred by the mortgage:
Power of sale
- A power to sell, or to concur with any other person in selling, the whole or any part of the mortgaged property by public auction or private contract, subject to any reasonable conditions the mortgagee may think fit to make, and to buy in at an auction and to rescind or vary contracts for sale, and to resell the land, from time to time, in like manner without being answerable for any loss occasioned thereby.
Power to insure
- A power to insure and to keep insured against loss or damage by fire any building or any effects or property of an insurable nature, whether affixed to the freehold or not, being or forming part of the mortgaged property, and the premiums paid for any such insurance are a charge on the mortgaged property, in addition to the mortgage money and with the same priority and with interest at the same rate as the mortgage money.
10. Receipts for purchase money sufficient discharges
A receipt for purchase money given by the person exercising the power of sale conferred by section 24 is a sufficient discharge to the purchaser, who is not bound to see to the application of the purchase money.
“R.S.O. 1990, c. M.40, s. 9”
“R.S.O. 1990, c. M.40, s. 10”
11. Notice before sale
(a)No sale under the power conferred by section 24 shall be made until after forty-five days notice in writing in the Form to this Act has been given to the persons and in the manner provided b
(bThe notice may be given at any time after fifteen days default in making any payment provided for by the mortgage.
12. Application of purchase money
The money arising from the sale shall be applied by the person receiving the same as follows:
Firstly, in payment of all the expenses incident to the sale or incurred in any attempted sale;
Secondly, in discharge of all interest and costs then due in respect of the mortgage under which the sale was made;
Thirdly, in discharge of all the principal money then due in respect of the mortgage;
Fourthly, in payment of the amounts due to the subsequent encumbrances according to their priorities;
Fifthly, in payment to the tenants of the mortgagor of the rent deposits paid under section 106 of the Residential Tenancies Act, 2006 where the rent deposit was not applied in payment for the last rent period, and the residue shall be paid to the mortgagor. R.S.O. 1990, c. M.40, s. 27; 1991, c. 6, s. 1; 1997, c. 24, s. 215 (1); 2006, c. 17, s. 252 (1).
“R.S.O. 1990, c. M.40, s. 11”
“R.S.O. 1990, c. M.40, s. 12”
NOTICE OF EXERCISING POWER OF SALE
13. Notice of power of sale
1. A mortgagee shall not exercise a power of sale unless a notice of exercising the power of sale in the Form to this Act has been given by the mortgagee to the following persons, other than the persons having an interest in the mortgaged property prior to that of the mortgagee and any other persons subject to whose rights the mortgagee proposes to sell the mortgaged property.
a. Where the mortgaged property is registered under the Land Titles Act, to every person appearing by the parcel register and by the index of executions to have an interest in the mortgaged property.
b. Where the Registry Act applies to the mortgaged property, to every person appearing by the abstract index and by the index of writs received for execution by the sheriff for the area in which the mortgaged property is situates to have an interest in the mortgaged property.
c. Where there is a statutory lien against the mortgaged property in favor of the Crown or any other public authority and where the mortgagee exercising the power of sale has written notice of the lien, to the Crown or other public authority claiming the lien.
d. Where the mortgagee has actual notice in writing of any other interest in the mortgaged property and where such notice has been received prior to the giving of notice exercising the power of sale, to the person having such interest.
2 . Interpretation
(a) In subsection (1), the expressions “parcel register” and “abstract index” include instruments received for registration before the time specified on the day immediately before the day on which a notice of exercising the power of sale is given.
14. When notice may be given and power exercised
Where a mortgage by its terms confers a power of sale upon a certain default, notice of exercising the power of sale shall not be given until the default has continued for at least fifteen days, and the sale shall not be made for at least thirty-five days after the notice has been given.
“R.S.O. 1990, c. M.40, s. 13 (1); 2000, c. 26, Sched. B, s. 13 (3)”
“2000, c. 26, Sched. B, s. 14”
“R.S.O. 1990, c. M.40, s. 14”
15. Manner of giving notice, general rules
(1)A notice of exercising a power of sale shall be given by personal service or by registered mail addressed to the person to whom it is to be given at the person’s usual or last known place of address, or, where the last known place of address is that shown on the registered instrument under which the person acquired an interest, to such address, or by leaving it at one of such places of address, or, where the mortgage provides for personal service only, by personal service, or, where the mortgage provides a specific address, to such address.
(2)Where a person to be given a notice of exercising a power of sale is an execution creditor, the notice may be given in the manner provided in subsection (1) by addressing it to the solicitor who issued the execution or, where there is no solicitor, to the execution creditor.
Construction lien creditors
(3)Where a person to be given a notice of exercising a power of sale is a construction lien claimant, the notice may be given in the manner provided in subsection (1) by addressing it to the solicitor who filed the claim for lien, but, where there is no solicitor and no address for service is shown on the claim for lien and the mortgagee has no actual knowledge of the lien claimant’s address, no notice need be given to such lien claimant.
Persons under disability
(4)Where a person to be given a notice of exercising a power of sale is under a disability, the notice shall be deemed to have been effectually given if given in accordance with subsection (1).
(5)Where a person to be given a notice of exercising a power of sale has died, the notice shall be deemed to have been effectually given if given by registered mail in accordance with subsection (1), and, subject to paragraph 4 of subsection 31 (1), shall be deemed to be effectual notice to all persons who have any interest in the deceased’s estate.
R.S.O. 1990, c. M.40, s. 15.
16. When notice by mail effective
A notice of exercising a power of sale shall, if given by registered mail, be mailed in Ontario, and such a notice shall be deemed to have been given on the day on which it was mailed.
Statutory declarations conclusive
Subject to the Land Titles Act and except where an order is made under section 39, a document that contains all of the following is conclusive evidence of compliance with this Part and, where applicable, with Part II, and is sufficient to give a good title to the purchaser:
1. A statutory declaration by the mortgagee or the mortgagee’s solicitor or agent as to default.
2. A statutory declaration proving service, including production of the original or a notarial copy of the post office receipt of registration, if any.
3. A statutory declaration by the mortgagee or the mortgagee’s solicitor that the sale complies with this Part and, where applicable,
17. Exercise of power of sale without notice
(1)Where a mortgage by its terms confers a power of sale upon a certain default and such default has continued for fifteen days, or where there has been at least three months default under a mortgage with respect to which a power of sale is conferred by section 24, a mortgagee may apply without notice to a judge or master of the Superior Court of Justice for leave to exercise power of sale without notice.
(2)Upon an application under subsection (1), the judge or master, as the case may be, shall, having regard to the circumstances, either grant leave to exercise the power of sale without notice or with such notice to such persons, in such manner and within such time as he or she considers proper.
“R.S.O. 1990, c. M.40, s. 16
with Part II. 1998, c. 18, Sched. E, s. 183.
R.S.O. 1990, c. M.40, s. 39 (1); 2000, c. 26, Sched. B, s. 14 (5).
R.S.O. 1990, c. M.17, s. 17 (2).”
GENERAL PROVISIONS AS TO POWER OF SALE
18. Restrictions as to proceedings
(1)Where, pursuant to any condition or proviso contained in a mortgage, there has been made or given a demand or notice either requiring payment of the money secured by the mortgage, or any part thereof, or declaring an intention to proceed under and exercise the power of sale therein contained, no further proceeding and no action either to enforce the mortgage, or with respect to any clause, covenant or provision therein contained, or to the mortgaged property or any part thereof, shall, until after the lapse of the time at or after which, according to such demand or notice, payment of the money is to be made or the power of sale is to be exercised or proceeded under, be commenced or taken until an order permitting the same has been obtained from a judge of the Superior Court of Justice.
Proof on which order may be granted
(2)The order may be obtained without notice or upon such notice as the judge may direct upon such proof as satisfies the judge that it is reasonable and equitable that the proposed action or proceeding should be permitted.
(3)This section does not apply to proceedings to stay waste or other injury to the mortgaged property.
“R.S.O. 1990, c. M.40, s. 18 (1); 2000, c. 26, Sched. B, s. 14 (5).
R.S.O. 1990, c. M.40, s. 18 (2).
R.S.O. 1990, c. M.40, s. 18 (3)”.
19. Payment made in terms of notice
(1)Where such demand or notice requires payment of all money secured by or under a mortgage, the person making such demand or giving such notice is bound to accept and receive payment of the same if made as required by the terms of such demand or notice.
Payment or tender of costs
(2)If there is a dispute as to the costs payable by the person by or on whose behalf such payment is either made or tendered, such costs shall, on three clear days notice to such person by the person claiming the same, be assessed and ascertained by an assessment officer.
Compliance with demand
(3)Where the time limited by the demand or notice requiring payment expires before the assessment of the costs has been completed, the amount due apart from the costs claimed may be paid, and payment of the amount allowed for costs within ten days after the issue of a certificate of assessment shall be deemed a compliance with the demand or notice.
(4)A mortgagee’s costs of and incidental to the exercise of a power of sale, whether under this Part or otherwise, may, without an order, be assessed by an assessment officer at the instance of any person interested.
Discretion as to costs
(5)The costs of the assessment shall be in the discretion of the assessment officer
“R.S.O. 1990, c. M.40, s. 19 (1-3)”
“R.S.O. 1990, c. M.40, s. 19 (4); 1993, c. 27, Sched”
“R.S.O. 1990, c. M.40, s. 19 (5)”
MORTGAGEES IN POSSESSION OF RENTAL RESIDENTIAL PREMISES
In this Part, “landlord” has the same meaning as in subsection 2 (1) of the Residential Tenancies Act, 2006; (“locateur”) “mortgagee” includes a condominium corporation with a lien enforceable under subsection 32 (6) of the Condominium Act; (“créancier hypothécaire”)
“rental unit” has the same meaning as in subsection 2 (1) of the Residential Tenancies Act, 2006; (“logement locatif”) “residential complex” has the same meaning as in subsection 2 (1) of the Residential Tenancies Act, 2006; (“ensemble d’habitation”) “spouse” means a person,
(a) to whom the person is married, or
(b) with whom the person is living in a conjugal relationship outside marriage, if the two persons,
(i) have cohabited for at least one year,
(ii) are together the parents of a child, or
(iii) have together entered into a cohabitation agreement under section 53 of the Family Law Act; (“conjoint”) “tenancy agreement” has the same meaning as in subsection 2 (1) of the Residential Tenancies Act, 2006; (“convention de location”) “tenant” has the same meaning as in subsection 2 (1) of the Residential Tenancies Act, 2006. (“locataire”) 1991, c. 6, s. 2; 1997, c. 24, s. 215 (2); 1999, c. 6, s. 38 (1); 2005, c. 5, s. 42 (1, 2); 2006, c. 17, s. 252 (2-6).
Single family home
1 For purposes of this Part, a single family home is a residential complex that consists of a single dwelling unit or a primary dwelling unit and not more than two subsidiary dwelling units and that is not subject to a tenancy agreement when the mortgage is registered.
1997, c. 24, s. 215 (3).
Duplexes or triplexes
(2) A residential complex that is a duplex or a triplex is not a single family home. 1997, c. 24, s. 215 (3).
When number of units determined
(3) In deciding whether a residential complex qualifies as a single family home, the number of subsidiary units shall be the number that existed when the default under the mortgage occurred.
“1997, c. 24, s. 215 (3)”.
(4) For purposes of this section,
“subsidiary dwelling unit” means,
(a) an apartment or a subsidiary residential unit, including premises whose occupant or occupants are required to share a bathroom or kitchen facility with the owner, the owner’s spouse, child or parent or the spouse’s child or parent, where the owner, spouse, child or parent lives in the building in which the premises are located,
(b) a room or other subsidiary unit that is rented for residential purposes, including one that is rented to a member of the mortgagor’s family or to an employee of the mortgagor.
1997, c. 24, s. 215 (3); 1999, c. 6, s. 38 (2); 2005, c. 5, s. 42 (3).
Application of Part
(1)In the event of a conflict between this Part and any other provision of this Act or any other Act, this Part prevails unless the provision or the Act states that it is to prevail over this Part.
(a) tenancies of residential units and tenancy agreements whether entered into before or after the 13th day of June, 1991;
(b) mortgages, whether registered before or after the tenancy agreement was entered into, or the 13th day of June, 1991. 1991, c. 6, s. 2; 1997, c. 24, s. 215 (4).
Person deemed to be landlord
1. A person who becomes the mortgagee in possession of a mortgaged residential complex which is the subject of a tenancy agreement between the mortgagor and a tenant or who obtains title to the residential complex by foreclosure or power of sale shall be deemed to be the landlord under the tenancy agreement. 1997, c. 24, s. 215 (5).
Person ceases to be landlord
(2) A person who is the landlord under the tenancy agreement ceases to be the landlord while another person is deemed to be a landlord under subsection (1).
1991, c. 6, s. 3; 1997, c. 24, s. 215 (6).
Person deemed to be landlord
(3) A person who is deemed to be a landlord is subject to the tenancy agreement and to the provisions of the Residential Tenancies Act, 2006 which apply to residential complex.
“1997, c. 24, s. 215 (7); 2006, c. 17, s. 252 (7)”
Person ceases to be landlord
(4) A person shall no longer be deemed to be the landlord under the tenancy agreement when the person ceases to be a mortgagee in possession.
1991, c. 6, s. 3; 1997, c. 24, s. 215 (8).
Mortgagee’s obligations continue
(5) Despite subsection (4), a person who is deemed to be a landlord under subsection (1) continues to be liable for the obligations of a landlord that were incurred while the person was deemed to be a landlord. 1991, c. 6, s. 3.
Notice to tenants
(6) A person who is deemed to be a landlord shall serve notice to all tenants of the change in landlord. 1991, c. 6, s. 3.
(8) The notice may be in the form prescribed by the regulations made under this Act. 1991, c. 6, s. 3.
48. (1) No person exercising rights under a mortgage may obtain possession of a rental unit from the mortgagor’s tenant except in accordance with the Residential Tenancies Act, 2006. 1997, c. 24, s. 215 (9); 2006, c. 17, s. 252 (8).
Person deemed to be landlord
(2) A person exercising rights under a mortgage who gives notice of termination of a tenancy shall be deemed to be a landlord under subsection 47 (1). 1991, c. 6, s. 3.
20. Mortgagee’s rights after default
50.(1)Despite section 42, a mortgagee may at any time after the default under a mortgage on a residential complex make inquiries of the mortgagor regarding the existence of any tenancy agreement and require the mortgagor to provide a list of tenants, if any. 1997, c. 24, s. 215 (10).Same
(2)Despite section 42, a mortgagee at any time after default under a mortgage on a residential complex which is the subject of a tenancy agreement may,
(a) enter into the common areas of the residential complex for the purpose of inspection;
(b) demand production from the mortgagor or the mortgagor’s tenant of a copy of the tenancy agreement if it is written; and
(c) demand from the mortgagor or the mortgagor’s tenant any particulars of the tenancy agreement. 1997, c. 24, s. 215 (10).Mortgagee not deemed mortgagee in possession
(3)The mortgagee does not become a mortgagee in possession of the residential complex by any of the acts described in subsection (1) or (2). 1997, c. 24, s. 215 (10).
Obligations of mortgagor
(4)In the circumstances described in subsection (1), the mortgagor shall provide the mortgagee with the information requested. 1991, c. 6, s. 3.
Obligations of mortgagor and tenant
(5)In the circumstances described in subsection (2), the mortgagor and the mortgagor’s tenant shall provide the mortgagee with the information and documents requested and shall permit the mortgagee to enter the common areas of the complex.
1991, c. 6, s. 3; 1997, c. 24, s. 215 (11).
Application for compliance order
(6)If a mortgagor or a mortgagor’s tenant does not comply with subsection (4) or (5), the mortgagee may apply to the Superior Court of Justice for an order requiring compliance.
1991, c. 6, s. 3; 2000, c. 26, Sched. B, s. 14 (5).
21. Mortgagee not to interfere
51.(1) No mortgagee or person acting on behalf of the mortgagee shall,
(a) deliberately interfere with a reasonable supply of any service, such as heat, fuel, electricity, gas, food or water to a rental unit or to the residential complex in which it is located, whether or not it was the mortgagor’s obligation to supply the service; or
(b) substantially interfere with the reasonable enjoyment of the rental unit or of the residential complex in which it is located for all the usual purposes by the mortgagor’s tenant or household with the intent of causing the mortgagor’s tenant to give up possession of the rental unit or to refrain from asserting any rights under this Act, the tenancy agreement or the Residential Tenancies Act, 2006. 1997, c. 24, s. 215 (12); 2006, c. 17, s. 252 (9).
(2) Any person who contravenes or fails to comply with this section is guilty of an offence and on conviction is liable to a fine of not more than $5,000 in the case of an individual and $25,000 in the case of a corporation. 1991, c. 6, s. 3.
(2)In considering the application, the judge shall have regard to the interests of the tenant and the mortgagee. 1991, c. 6, s. 3.
Form of notice
(6) The form of notice of termination may be the same as the form used under section 48 of the Residential Tenancies Act, 2006 except that it shall be modified to indicate that the mortgagee is obtaining possession on behalf of a purchaser who requires the single family home or any part of it occupied by a tenant for the purpose of occupation by himself or herself, his or her spouse or a child or parent of his or hers or of his or her spouse. 1991, c. 6, s. 4; 1997, c. 24, s. 215 (14); 1999,c. 6, s. 38 (4); 2005, c. 5, s. 42 (5); 2006, c. 17, s. 252 (13).
Order for termination of tenancy
(7) A person who has served notice may apply for an order terminating the tenancy and evicting the tenant under section 69 of the Residential Tenancies Act, 2006. 1997, c. 24, s. 215 (14); 2006, c. 17, s. 252 (14, 15).
Purchaser exercises rights of mortgagee
(8) For the purpose of obtaining possession, a purchaser may exercise the rights of the person who served the notice of termination.
1991, c. 6, s. 4.
22. Tenant’s right to recovery
(3)If the tenant makes an application or is entitled to make an application, and the premises are occupied by another tenant, the original tenant may bring an action against the purchaser to recover any costs and damages incurred as the result of the tenant having to vacate the premises. 1991, c. 6, s. 4.
Tenant’s rights preserved
56.Nothing in this Part diminishes any rights which a tenant of a mortgagor has at common law or in equity where the mortgagee is bound by the tenancy agreement.
1991, c. 6, s. 5; 1997, c. 24, s. 215 (16).
58.The Lieutenant Governor in Council may make regulations prescribing the form of notice described in subsection 47 (8). 1991, c. 6, s. 5.
24.NOTICE OF SALE UNDER MORTGAGE
R.S.O. 1990, c. M.40, Fo
David A. Trott
Jeffrey D. Weisserman
Trott & Trott,
FORECLOSURE BY ADVERTISEMENT v. JUDICIAL FORECLOSURE
If foreclosure is the best solution, the attorney will need to decide which type of foreclosure, judicial or by advertisement, should be utilized. The mortgage must contain a power of sale clause in order to foreclose by advertisement. Each procedure has different advantages. Foreclosure by advertisement is usually less expensive and time consuming than a judicial foreclosure and it may also help avoid problems since the onus is on the mortgagor to start a lawsuit if he or she disputes the foreclosure. A judicial foreclosure
may be preferred if the attorney knows at the outset that there are title problems or that a receiver may be required. A judicial foreclosure may be helpful if the mortgagee intends on pursuing a deficiency judgment because the value of the security is less than the mortgage debt.
FORECLOSURE BY ADVERTISEMENT
A. Initial Considerations
The mortgage must contain a clause granting the mortgagee the power to sell the property because of a default. MCLA 600.3201; MSA 27A.3201. Bradway v. Miller, 200 Mich. 648, 167 NW 15 (1918)· The mortgagor must have breached a covenant of the mortgage. MCLA 600.3204 (1); MSA 27A.3204 (1). No other action may be pending to recover the debt secured by the mortgage. If a suit has been commenced to collect the debt, the mortgagee will have to establish that execution on the judgment has been returned unsatisfied. MCLA 600.3204 (2);MSA 27A.3204 (2). The mortgage, assignments and all modifications must be in recordable form and recorded as of the time of sale. MCLA 600.3204 (3); MSA 27A.3204 (3). Does the mortgage contain any special notice requirements? Does the mortgagee have to mail a breach letter 30 days before the commencement of foreclosure?
B. The Notice of Foreclosure
Section 3212 requires the notice of foreclosure contain the following information
(1) the names of the mortgagor and the mortgagee, and the assignee of the mortgagee, if any; (2) the date of the mortgage, and when recorded; (3) the amount claimed to be due thereon as of the date of the notice; (4) a description of the mortgage premises, conforming substantially with that contained in the mortgage; and (5) the length of the redemption period. Pursuant to MCLA 600.3204(1)(d), a party may foreclose if it is the owner of the indebtedness, of an interest in the indebtedness, or if it is the servicing agent.
MCLA 600.3204(3) requires an assignment to be on record prior to the sale.
C. Publication and Posting
The notice should be published once a week for four (4) successive weeks in a newspaper which is published in the county where the premises being foreclosed are situated. MCLA.600.3208; MSA 27A.3208.
A true copy of the notice of foreclosure must be posted in a conspicuous place upon any part of the premises within fifteen (15) days of the first publication.
MCLA 600.3208; MSA 27A.3208. The individual doing the posting should advise the attorney if the property is vacant and should maintain copious notes in the event the mortgagor challenges the posting.
D. Sheriff’s Sale
· Preparing for the Sale. The attorney should contact the client before the sale to determine: (a) the bid amount at sale; (b) the occupancy status of the property; (c) if the property has been damaged by fire; and (d) if there is any reason to adjourn the sale. If the property has become vacant since the first publication, it may be possible to utilize MCLA 600.3241(1), MSA 27A.3241(1), to shorten the redemption period. If the property has been damaged by fire, the sale should be adjourned until the property is repaired or the fire loss settled. If the sale is held,the mortgagee may lose its right to the loss proceeds. See Smith v. General
Mortgage Corporation, 402 Mich. 125, 261 NW2d 710 (1978).
· The Sale.
· The sale must be public and held between 9:00 and 4:00 o’clock at the place of holding circuit court for the county in which the premises is located.
MCLA 600.3216, MSA 27A.3216. See Heinmiller v. Hatheway, 60 Mich. 391, 27 NW 558 (1886). The sale must be conducted so that a prospective purchaser of ordinary intelligence understands which property is being offered. Hogan v. Hester Investment Co., 257 Mich. 627, 241 NW 881(1932).
· Surplus proceeds from the sale are to be paid to a subsequent mortgagee or lien holder in the event a claim is filed as required by MCLA 600.3252, MSA 27A.3252, otherwise the surplus belongs to the mortgagor.
· The redemption period will run from the date of sale if it is recorded within twenty (20) days of the date of sale. If it is recorded more than twenty (20) days after sale, the redemption period will run from the date the deed is recorded. MCLA 600.3232.
· Adjourning the Sale. The sale may be adjourned on a weekly basis by posting a notice of adjournment, or for a longer period of time by publishing a notice. MCLA 600.3220, MSA 27A.3220
· The statute governing the length of the redemption period is confusing and unnecessarily complicated. MCLA 600.3240, MSA 27A.3240. The redemption can be as short as 30 days or as long as 12 months. Each foreclosure will fall into one of the following categories:
· Mortgage dated after January 1, 1965, on commercial, industrial, or multifamily residential property in excess of four (4) units.
· Not abandoned: six (6) months;
· Abandoned pursuant to 3241: not possible;
· Abandoned pursuant to 3241(1): not possible;
· Mortgage dated after January 1, 1965, on residential property with less than four (4) units, which is less than three (3) acres, and with a mortgage debt as of the date of first publication which is less than 2/3 of original indebtedness.
· Not abandoned: one (1) year;
· Abandoned pursuant to 3241: three (3) months;
· Abandoned pursuant to 3241(1): 30 days.
· Mortgage dated after January 1, 1965, on residential property with less than four (4) units, which is less than three (3) acres, and with a mortgage debt as of the date of first publication which is more than 2/3 of original indebtedness.
· Not abandoned: six (6) months;
· Abandoned pursuant to 3241: one (1) month;
· Abandoned pursuant to 3241(1): 30 days.
· Mortgage involving residential property with less than four (4) units and which is more than three (3) acres.
· Not abandoned: one (1) year;
· Abandoned pursuant to 3241: 30 days, or 15 days from notice of
Shortening, whichever is longer?
· Jurisdiction in Circuit Court. MCLA §600.3101.
· Venue appropriate where property is located. MCLA §600.1605
· Must name and serve anyone with interest in the property.
· Big delay
· Sale may not take place within 6 months of the filing of the Complaint.MCLA §600.3115
· Publish for 6 weeks prior to sale. MCLA §600.6052(2);
· Post in 3 public places in township or city. MCLA §600.6052(1).
· Court may fix upset price. Almost always aimed at Commercial properties.MCLA §600.3165.
· May not shorten redemption period if abandoned.
The power of sale is language added to a mortgage document that allows the lender to sell the property if the mortgage payments are not met, thereby permitting the lender to repay the mortgage debt. A property that is foreclosed is sold by the lender (usually a bank) in order to recover losses incurred by the loan default. In addition to a mortgage term, power of sale also refers to the power expressed or implied in a trust agreement permitting the trustee to sell the investments comprising the trust
- Devid A. Trott, Mortgage Foreclosures, RSO.1990.
- Jettrey D. Wesserman,Trott & Trott, P.C . 1990
- McCarthy & Neggo, Law Of Practice, General Rule, and Page-1051.
- Walsh J Stated 1971, Law of Practice, Page-164-165.
- Development Finance, Linnpark,WASA 272,October-2002.
- Jacobe,McCarthy & Neggo,Law Of Practice ,Page-1052.
- Real Property Act-1990 (NSW).
- Fabrizio & Brook. PC
- Mortgage Act Parts 1-5
- Martinson & Clowes ,Law of Practice 1882
- “Policy No.PL 2.05.02 Date Issued February 11, 1997 ’’