We hear a lot from the Superior Court of Justice and a lot from the Court of Appeal, but rarely from the Divisional Court about section 8 of the Interest Act. Section 8 prohibits charging more interest after the borrower/mortgagor defaults on the mortgage. It is designed to prohibit penalizing the mortgagor for defaulting.
The appeal was on a Justice Myers decision. Justice Myers held the clause in the commitment letter that permitted the lender to charge greater interest on the last month of term if there was no discharge or renewal.
The Divisional Court set his decision aside and found the provision legal and not violating section 8 of the Interest Act. The Court held the increase of interest charge as a result of the passage of time does not fall under the scope of section 8.
Given this judicial pronouncement, lenders who employ the above provisions can sit easy that their interest charge will likely be legal and, therefore, collectible.
This is not legal advice. Please consult us for legal advice catered to your specific facts and circumstances.