Management Fees and Other Fees After a Mortgage Goes into Default: Are They Legal?

Many mortgages contain provisions relative to fees to be paid by borrowers if and when the mortgage goes into default. Fees for a default on a mortgage include non-payment of a due mortgage payment and/or non-payment of mortgage balance on or prior to the mortgage maturity date.

Fees can include charges for issuing statements, charges for missed payments, charges for NSF cheques, 3 months’ interest penalty, and management fees where a lender has obtained a writ of possession.

Legitimate Fees or Disguised Interest?

The Interest Act provides that a lender may not charge a higher interest rate for the mortgage amount in arrears than for the amount not in arrears.

Where a mortgage contains provisions for fees such as the ones set out above, which are not related to actual out-of-pocket costs incurred by the lender, courts have rejected the fees as being disguised interest charges offending the Interest Act or as being non-enforceable penalties.

We are aware that many private and sub-prime lenders impose fees after a default, including a 3-month interest penalty after maturity, management fees, excessive legal fees, and missed payment fees, which may be unenforceable or illegal.

Contact Financial Litigation in Toronto if You’ve Been Charged Fees Relating to a Mortgage Default

If your home was sold under a power of sale and/or if you received discharge statements including any of the above fees, a lawyer at Financial Litigation may be able to help you, including recovering fees that you have already paid or were retained by the lender selling under a Power of Sale.

The lawyers at Financial Litigation are experienced in defending enforcement claims. If you have been served with a Notice of Sale or a Statement of Claim, call 416-769-4107 ext. 1 or email ek@karplitigation.ca to discuss your rights, including an assessment of the legality of any fees imposed by a lender.