In a series of previous blog posts, we discussed the effect of certain charges being included on a mortgage statement, and the potential of those charges being found in violation of the Interest Act.
In this blog, we look at what happens if a mortgagee transfers a property under Power of Sale, and the Notice of Sale is found to be invalid due to unauthorized charges being included in the discharge statement. Does the mortgagor who lost his or her property through Power of Sale to a new purchaser have an argument to reverse the sale on the basis that the mortgagee’s Notice of Sale was invalid?
The Doctrine of the Bona Fide Purchaser
The legal doctrine of the bona fide purchaser states that a purchaser has the legal right to receive title to a property if their purchase was carried out in good faith, without fraud or deceit. Does this doctrine insulate a new owner from a claim that the sale was invalid because the transferor-mortgagee had no authority to transfer the property?
In the case of Stanbarr Services Limited v. Metropolis Properties Inc., the Court held that unless the purchaser had actual notice of a defect in service of the Notice of Sale, the sale would be valid because of certain provisions in the Mortgages Act that deem service to be valid where certain requirements for service are met. In this case, the Court relied extensively on the mirror principle and the curtain principle arising under the Land Titles Act. The issues around the mirror and the curtain principles are very complex and beyond the scope of this blog.
However, it is arguable that Stanbarr could and should be limited to cases where a deficiency in a Notice of Sale is not with the Notice itself but rather with the service of the Notice.
In TD Auto Finance (Canada) Inc v Yan, the Court of Appeal for Alberta allowed TD to recover/maintain its security interest in a vehicle that had been “cloned” and sold to an unsuspecting purchaser. This case demonstrates that there are limits to how far the doctrine of the bona fide purchaser will insulate an innocent purchaser from having their purchase reversed or upheld when the purchase deprives an innocent party.
Litigation in Toronto for Power of Sale Actions
The lawyers at Financial Litigation have extensive experience in litigating cases relating to real estate and mortgage fees.
If your house was sold under a Power of Sale and you would like to attempt to reverse the sale and recover your property, call Eli Karp at 416-769-4107 ext.1 or email [email protected].