September 4th - 2012

Legal Beat: Once it's sold, it's sold

The law indicates that on the date the bank signs an unconditional agreement of purchase and sale with a buyer, the original borrower has no further legal right to pay off his mortgage.

“The law indicates that on the date the bank signs an unconditional agreement of purchase and sale with a buyer, the original borrower has no further legal right to pay off his mortgage. But the borrower's rights may be extended by the lender in certain circumstances.” This is according to Mark Weisleder in the Toronto Star.

The above is a correct statement of the Ontario law dealing with the power of sale process. It has been confirmed in several Ontario court decisions and mentioned in many of my previous editions of “Merv’s Comments”. Nevertheless, some desperate borrowers continue to litigate the issue. Here are a few recent court comments:

“Therefore, where the mortgagee acts in good faith, it will not be restrained from exercising the power once it has entered into a binding agreement of purchase and sale. After that time, the mortgagor no longer has the right to tender payment.”

“A mortgagor who has defaulted can retain the mortgaged property by payment of the amount in default, but only before an agreement for sale has been entered into by the mortgagee "even where the agreement is said to be subject to the right of the mortgagor to redeem or put the mortgage into good standing”.

“The plaintiff argues, however, that if the offer is conditional then this principle of law does not apply. There are a number of clauses to which the plaintiff refers in arguing that the agreement is conditional, specifically to the various standard title clauses, the clause concerning compliance with Part III of the Mortgages Act which is in issue in this motion, and especially the “redemption out" clause.”

“The Court of Appeal held that a "redemption out" clause does not render an agreement conditional.”

“The result is that the plaintiff simply failed to redeem before the property was sold and it is too late now for the plaintiff to redeem the mortgage.”

1175945 v Wade 2010 ONSC 3732

MERV'S COMMENTS
An owner of Ontario property has a right to redeem until the property is “sold”. That means when there is a binding Agreement of Purchase and Sale (APS). The mortgagee could conceivably provide for a condition in the APS that might give the owner further redemption rights, but that may not be normal in residential offers. However, I have seen that in some commercial APS Schedules.

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