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  • Daniel Ebady

Mortgagor’s Right To Redeem After Commencement of Power of Sale Proceeding and Court Action

The common law is rich in cases of mortgagees (lender) and mortgagors (borrower) dueling it out against each other when the mortgagor defaults. This is either by way of the mortgagor failing to pay the monthly payments or the mortgage entering into maturity, and the mortgagor cannot obtain any financing and the mortgagee refuses to extend the mortgage. At this point, the mortgagee and the mortgagor’s rights clash.


In respect of the mortgagor, the courts “jealously” guard against a mortgagor’s right to redeem its mortgage. In other words, courts protect a mortgagor’s right to put its mortgage back to good standing even after it has defaulted. The Mortgages Act even goes as far as expressly allowing the mortgagor to redeem the mortgage right up to the sale of the property or filing of a lawsuit against the mortgagor.[1]


In a recent case, the court applies section 23(1)(a), which entitles a mortgagor to seek a dismissal of an action by the mortgagee for possession and sale of the mortgaged property. So long as the mortgagor pays $100 as security for costs to the credit of the action or pays amounts due under the mortgage and the costs of the action.


Background:


The mortgagor misses two monthly payments. A deadline is given by the mortgagee to the mortgagor to pay the amounts in arrears. The mortgagor asked for extensions and ultimately failed to pay on the agreed upon deadlines.


Mortgagee issues a notice of sale and brings an action and moves for summary judgment.

The mortgagor brings a counterclaim and brings its own summary judgment.


Court:


The court decided that the motion can be heard by way of a summary judgment motion. The court found the mortgagee demanding payment so early was heavy-handed. The mortgagor did not have a history of missing payments.


The court laid out the two avenues of relief for a mortgagor who has fallen in default: section 22 and 23 of the Mortgages Act. The court easily dispensed with section 22 as that section applies to defaults where no action by the mortgagee has been commenced.


Section 23 is the applicable relief provision as it provides relief to a mortgagor where an action had been commenced. In this case, the mortgagee had filed an action.


Section 23 holds that where there is a default on a mortgage and the mortgagee brings an action, the mortgagor can dismiss the action if they pay into court a sum of $100 as credit of the action for security of costs; or pay the amounts due under the mortgage (not including amounts incurred as a result of time elapsing). For the latter, the mortgagor must also pay the costs of the action.


If the above conditions are met, then a court can dismiss the action.


Based on section 23, the court gave the mortgagor an opportunity to bring the mortgage back into good standing though the mortgagee has started power of sale proceedings and brought an action.


Takeaway:


A mortgagor has powerful rights and are protected under the law. One of which being their ability to redeem their mortgage even after power of sale proceedings and a court action has been commenced.


Lenders must be wary of this powerful right and must approach it in accordance with the law to ensure their monies they have lent out are protected.

[1] S. 22(1)(a) and 23.

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