I live in Ontario. I have been very concerned about the matters of foreclosure and Power of Sale, as I have recently filed a Consumer Proposal (Division I) to my unsecured creditors, which has been accepted by them. My house mortgage (secured) is itself in perfect standing, and is in no way threatened by my newly remedied consumer credit situation.

Although the Bankruptcy and Insolvency Act [65.1(1)] prohibits the cancellation of contracts such as mortgages for the sole reason that a party has become insolvent or has filed for DIvision I Proposal to Creditors, my mortgage company (GMAC) has been rattling its sabre at me. They have sent me a letter telling me that my insolvency puts me in default and that they are now entitled to demand payment in full immediately, but that they will not exercise this “right” if I pay them a “service charge” ($150) for their trouble, and sign and witness a document that confirms my acceptance of their position and essentially re-states what was set down in the original mortgage regarding my obligations to pay.

The trustee at BDO-Dunwoody who arranged my Proposal has reviewed this letter and document, and tells me that I should not comply with any of these demands – that they are unlawful, and that I should ignore them. He tells me they are in contravention of the BIA, and that he intends to contact GMAC.
However, I am concerned that by refusing to pay this fee and sign what seems to me to be “unreasonable” paperwork, I will strengthen GMAC’s case that I am “in default”.

Am I protected in any way against them? I am not sure what is legally meant by a default “continuing” (e.g., for more than 15 days). If I read my mortgage correctly, the power of sale provisions allow GMAC to initiate the sale of my house, without notice, if I “continue in default” for more than 60 days. Am I “in default” because I have not paid a $150 service charge or returned these papers? Could they suddenly sell my house even though my payment history is perfect?

I find this very alarming.

Thank you in advance for any information you can provide.

~W. O’Connor

I am actually located in the Greater Toronto Area. I have an office in downtown Toronto and I also work as counsel to a law firm, Wilson Vukelich, located in Markham, so I divide my time between the two offices. I am a member of the New York State Bar as well as the Law Society of Upper Canada in Ontario. I can represent clients in New York although it is usually cheaper for them to have a lawyer who is based wherever the lawsuit is located in New York, but from time to time I will go to New York to represent clients if they prefer to have someone here. An example of this may be where an Ontario resident or business has a problem down in New York State and they’d prefer to have someone here in the Toronto area who they can meet with face to face on occasion.

That said, the usual issue in mortgage enforcement matters are conflicts of interest. In my past life with the large downtown law firms I have represented pretty much every major bank and I still represent many banks, credit unions, trust companies and factoring companies. So the problem is often that if you have a problem with, for example, CIBC, then I will not be able to act against them unless they waive the conflict of interest (because I know how they think in various litigation situations and what their “pressure points” are). Similarly, even if I have not acted for a particular bank, but someone at Wilson Vukelich has, then a conflict is likely to arise. These conflicts were a very big problem for me on Bay Street and, at least to the extent that they still exist for the banks, they will continue to be an issue.

CALC

I disagree with your response. The reason for it is because the Real Property Limitations Act would not apply. Subsection 43(1) of that Act deals only with the fact that if a bank loaned money to a customer and took a mortgage as security and then at some point the customer did not repay what was owing (either in full at the end of the mortgage term or in part – eg. defaulted on a monthly payment), then the bank has 10 years to sue on the mortgage and if the bank does not sue within 10 years then it’s too late. This is an issue solely between the lender and the borrower and has no application to any issue of ownership via adverse possession (usually between neighbours).

The key is found in Subsection 51(2) of the Land Titles Act. For your convenience, I will repeat the wording of subsections 1 and 2:

51. (1) Despite any provision of this Act, the Real Property Limitations Act or any other Act, no title to and no right or interest in land registered under this Act that is adverse to or in derogation of the title of the registered owner shall be acquired hereafter or be deemed to have been acquired heretofore by any length of possession or by prescription. R.S.O. 1990, c. L.5, s. 51 (1); 2002, c. 24, Sched. B, s. 40 (2).

(2) This section does not prejudice, as against any person registered as first owner of land with a possessory title only, any adverse claim in respect of length of possession of any other person who was in possession of the land at the time when the registration of the first owner took place.

The key wording is in subsection (2): “This section does not prejudice … any adverse claim … of any other person who was in possession of the land at the time when the registration … took place.”

If, using my example, Owner D has possession of the land at the time that the property went from the registry system to the land titles system, then Owner D has an adverse claim that is protected by subsection 51(2). The reason that this is so is because on adverse possession cases the owners are allowed to “daisy chain” if you will the adverse possession time. So, for example, the key time period is 10 years. Suppose that a person claims adverse possession but has only owned the land for 7 years. The neighbouring owner cannot say “tough luck, you haven’t owned it for 10 years or more”. The key concept is whether the POSSESSION has existed for 10 years or more. So, using this example, if the prior owner had adversely possessed the land for 3 or more years, then the current owner would be able to say that there has been adverse possession for 10 or more years and therefore title to whatever lands were adversely possessed can be granted to the owner claiming adverse possession. Therefore, if Owner D has possession at the time of the conversion from registry to land titles, then he acquires Owner A’s adverse possession rights and this exists at the time registration under land titles first occurs and the exception in Subsection 51(2) comes into application and Owner D can claim title by adverse possession over the two feet strip in the example.

I hope that this clarifies things for you.

CALC

According to Section 51, 1 & 2 of the Land Titles Act it states that the home registered under the “new” system are no longer susceptible to Adverse Possession regardless of length of possession or by prescription.

You mentioned: “if I have made use of your property without your permission and in a way known to you (for which you did not object) for 10 years or more AND the 10 years expired BEFORE your property became registered under the land titles system, then I still have a claim for adverse possession

The only thing I can find in relation to your scenario is found in the Real Property Limitations Act Section 41(1) Mortgage Covenant. This would mean that, in your scenario, owner “D” would only be able to make the adverse claim of 2 feet if the 10 years expired before it was registered in the land titles system AND he has been the mortgage holder for those ten years. In your scenario even though the two feet may have been in adverse use for 40 years, owner “D” only bought the property in 2000, therefore he has only had the mortgage for 8 years. He has to have held the mortgage for ten years prior to the new registration.

Mortgage covenant
43. (1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,
(a) the expiry of 10 years after the day on which the cause of action arose; and
(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred. 2002, c. 24, Sched. B, s. 26 (1).

Please respond if you agree with this or not. Thank very much Sean.