In prior blog posts, we addressed the typical steps that occur after a mortgage has gone into default, which are (1) Notice of Sale, which initiates the Power of Sale process; and (2) Statement of Claim, which is used to fix the amount owing for outstanding principal, interest, costs, and fees.
What is the standard process for enforcing rights upon the default of a mortgage?
Under s 31 of the Mortgages Act, a lender cannot sell under a Power of Sale unless a Notice of Sale has been served.
A Notice of Sale can be issued once a mortgage has been in default for 15 days.
Under section 42 of the Mortgages Act, once a Notice of Sale has been issued, the mortgagee must not take any further proceeding or action to enforce the mortgage for 35 days unless leave of a judge has been obtained.
Under the Rules of Civil Procedure, once a defendant (in this case the borrower) is served with a Statement of Claim, the defendant has 20 days to serve and file a Statement of Defense.
As set out above, under section 42 of the Mortgages Act, once a Notice of Sale is served, the lender cannot take any further steps to enforce the mortgage, including serving a Statement of Claim.
Therefore, given the above, if a Notice of Sale is issued prior to issuing and serving a Statement of Claim, the lender will not be able to obtain default judgement until at least 55 days after serving the Notice of Sale (35 days under sec 42 of the Mortgages Act and 20 days under the Rules of Civil Procedure).
What about simultaneous service of Statement of Claim together with Notice of Sale?
In Mckenna Estate v Marshall, the court held that simultaneous service of a Statement of Claim and a Notice of Sale offends the statutory scheme set out in sec 31 and sec 42 of the Mortgages Act. The court further held that issuing a Statement of Claim prior to the service of the Notice of Sale is similarly improper.
Contact Financial Litigation in Toronto for Experience Representation in a Mortgage Default Matter
We are aware that many mortgage enforcement lawyers simultaneously serve a Notice of Sale and a Statement of Claim in an attempt to shorten the period after which the borrower may redeem the mortgage. This may be improper.
The lawyers at Financial Litigation are experienced in enforcing defaulted mortgages and 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 [email protected] to discuss your rights.