REALWorld Law

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Depending on the province in which any mortgaged property is located a foreign lender may need to obtain a license or be registered in order to do business in such province and to lend in such jurisdiction.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Fees will be payable for the registration of mortgages, hypothecs and other security interests, however, the amount will vary in each jurisdiction. Fees on enforcement may be levied in connection with any foreclosure process in the courts.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

As with all corporate transactions, the granting of a mortgage or hypothec over real property requires the officers of corporate grantor to comply with its applicable articles of incorporation and by-laws and the laws or regulations of the jurisdiction governing such transaction. As an example, certain jurisdictions may restrict the ability of a corporation to grant financial assistance if at the time of granting such assistance, the corporation is insolvent.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

There are no restrictions on repayments being made to foreign lenders under security documents or loan agreements. However, parties will need to consider their obligations in respect of payment of withholding tax. There are also restrictions on payments that have a prescribed connection with certain countries and terrorist or other restricted groups.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

A creditor can agree to subordinate its security interest to that of another creditor by agreement. The applicable agreement will regulate the subordination of the debt as well as the security and will cover matters such as rights of enforcement as between the two contracting parties.

Liens resulting from a property owner’s failure to pay real estate taxes or common area or strata charges due under a condominium regime may have 'super-priority' over liens for mortgage debt, notwithstanding the fact that such mortgage lien may have been granted and registered prior in time to the filing of such tax or condominium lien. In addition, local laws may vary as to the priority given to a mechanic’s or builder’s lien filed as a result of an owner’s failure to pay contractors making improvements to a property.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

If it is clear that the parties to the security document have made a bona fide choice of law by which the document will be governed, then generally that law will apply and the courts will apply that law in resolving a dispute to the extent that that law can be proven to the satisfaction of the court. However, local courts will not give effect to a foreign law, even where it is clear from the circumstances that the foreign law is intended to apply, where applying that law would be contrary to public policy.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Registration of a mortgage or hypothec is generally a prerequisite to a validly perfected mortgage charge in real estate. However, failure to perfect the charge does not in fact make such charge invalid. The charge could be perfected at a later date subject to arguments that upon a bankruptcy filing of the mortgagor, the granting of such mortgage constituted a fraudulent conveyance or is otherwise ineffective against the trustee in bankruptcy or other secured creditors.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

A lender holding security over real estate does not normally incur environmental liability relating to the making of a mortgage loan, provided the lender does not itself cause or knowingly permit environmental damage to the subject property.

Generally, environmental laws can be enforced against an owner or occupier of land irrespective of who caused the problem. Environmental laws could therefore apply to lenders where they are in occupation of the land (for example, where a mortgagee is in possession of the security property following a borrower's default).

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Each provincial jurisdiction imposes different procedural hurdles before a mortgage or hypothec in real estate can be enforced. Some provinces require judicial intervention while others permit non-judicial remedies.

Generally, the borrower must be given notice of default and prescribed notice periods must be complied with before a lender can enforce a mortgage or hypothec. Statutory notice periods vary in each jurisdiction.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Lenders to troubled real estate owners may be able, to the extent the mortgage agreement provides, to appoint a receiver or agent to collect rents and manage the property so as to protect the relevant collateral. The receiver can act to preserve the asset while foreclosure proceedings may be pursued.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Generally, the onset of a borrower’s insolvency does not affect the validity of a mortgage or hypothec granted to secure an obligation. However, the filing of any form of bankruptcy petition automatically stays foreclosure proceedings against the borrower. Nonetheless, courts may grant the lender relief from the automatic stay and the lender’s security may be enforced pursuant to the general enforcement rules.

Last modified 22 Mar 2024

Which assets and rights are considered to be real estate or real rights over which security can be granted to a lender?

Creditors holding registered mortgages or hypothecs will generally be paid in priority based on the timing of registration of their security interests. Generally, unsecured creditors rank in priority behind secured creditors who have properly registered their interests.

Last modified 22 Mar 2024