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9. Mortgage Proceedings

(a) Overview

When a property owner (mortgagor) defaults on a mortgage, the lender (mortgagee) typically can move to re-take the property under either mortgage foreclosure or "power of sale" proceedings. When this is done, the question arises as to the status of any tenants in possession the premises at the time, and any rights of the mortgagee (and subsequent purchasers) to possession of the rented premises. These situations are addressed in Part V of the Mortgages Act, and are considered in this section.

For these purposes, "mortgagee" includes a condominium corporation with a lien enforceable under subsection 85(6) of the Condominium Act" [Mortgages Act, s.44]. Section 85(6) gives the condominium corporation a lien against the owner regarding common expenses and fees etc.

In larger residential complexes the mortgagee essentially "steps into the shoes" of the defaulting mortgagor landlord [Mortgages Act, s.47(1)] and (with necessary re-direction of rent) the tenancy essentially "runs with the land" as discussed in Ch.1, s.2(d): "Fundamentals: Formation of a Tenancy: Transfer of Tenancy by Landlord".

(b) "Single Family Home" Defined

The law gives special treatment to "single family homes" with tenancies in mortgage default situations (discussed below), granting both the mortgagee and any subsequent purchaser rights to terminate the tenancy for personal or close family possession, similar to the "personal and purchaser possession" rights over regular tenancy situations [see Ch.5, s.2].

For these purposes, a "single family home" is [Mortgages Act s.45(1)]:
... a residential complex that consists of a single dwelling unit or a primary dwelling unit and not more than two subsidiary dwelling units and that is not subject to a tenancy agreement when the mortgage is registered.
The number of "subsidiary dwelling units" is counted from the date of default of the mortgage [Mortgages Act s.45(3)], and they are defined as either [Mortgages Act s.45(4)]:
  • an apartment or a subsidiary residential unit, including premises whose occupant or occupants are required to share a bathroom or kitchen facility with the owner, the owner's spouse, child or parent or the spouse's child or parent, where the owner, spouse, child or parent lives in the building in which the premises are located,

  • a room or other subsidiary unit that is rented for residential purposes, including one that is rented to a member of the mortgagor's family or to an employee of the mortgagor.
The definition of "single family home" does not however include duplexes or triplexes [Mortgages Act s.45(2).

(c) Mortgagee-as-Landlord Status

. Overview

There are three ways in which a mortgagee may become the "new" landlord as a result of mortgage default.

. Becoming a Landlord by Title Transfer

In law, a mortgagee who obtains title to property as a result of mortgage foreclosure proceedings [and a "mortgagee-in-possession", see below] - replaces the former landlord and becomes the new landlord over any tenants in that property, subject to the RTA and the terms of any applicable tenancy agreements [Mortgages Act s.47(1-3)].

. Becoming a Landlord by being "Mortgagee-in-Possession"

As noted above, a "mortgagee-in-possession" also becomes the new landlord by virtue of Act s.47(1). However this status is unclear even in mortgage law [Ziff: Principle of Property Law, 2nd ed. (Carswell, 1996, p.383-6)] (and neither is the term defined in the Mortgages Act).

Actual "possession" is not required to achieve such status - and would in any event conflict with the tenant's possession of the premises (exclusive possession is the primary indicia in law of a tenancy). The status seems to evolve from an old common law entitlement of possession by a mortgagee on default, unless such right was otherwise alienated by contract. Some authority exists for the proposition that the acceptance of rent by the mortgagee in mortgage situations is adequate to establish this status, though that is circuitous as a primary function of s.47(1) is to clarify whom the tenant legally owes rent to. It is beyond the scope of the present Legal Guide to explore this issue further.

In any event, if the "mortgagee-in-possession" ceases to have that status (and has not since obtained title), then their status as landlord ceases [Mortgages Act s.47(4)], though they retain liability for any "obligations of a landlord that were incurred while the person was deemed to be a landlord". [Mortgages Act s.47(5)]

. Becoming a Landlord by Service of Notice of Termination to Tenant

In addition, a mortgagee who serves a Notice of Termination to a tenant by virtue of rights granted under a mortgage, is deemed in law to be the landlord [Mortgages Act s.48(2)].

(d) Rights and Duties of Mortgagee-as-Landlord

. Notice of Change of Landlord to Tenants

Upon "becoming" a landlord in the mortgage situations explained above, the new landlord must notify the tenants of that fact in writing, providing their name and address [Mortgages Act s.47(6)(7)]. There is no official form for such a "Notice of Change of Landlord" prescribed yet [Mortgages Act s.47(8), 58].

It is at this point that the parties' mutual L&T and RTA duties arise: primarily, the tenant's duty to pay rent to the new "landlord" - and the landlord's duty to respect the tenant's possession and tenure rights, subject to the termination and eviction provisions of the RTA [Mortgages Act s.48(1)].

. Landlord's Right to Tenancy Details and Inspection

Despite the general rule that a mortgagee may not move to enforce their rights until a court so orders [Mortages Act s.42], the mortagee has the following rights in respect of a tenancy anytime after default, but before the court order. Note that the mortgagee/landlord does not by any of these acts establish their status as a "mortgagee-in-possession" [see that discussion above] [Mortgages Act s.50(3)].

The mortgagee/landlord may "make inquiries of the mortgagor regarding the existence of any tenancy agreement and require the mortgagor to provide a list of tenants, if any" - and the mortgagor is obliged to comply [Mortgages Act s.50(1)(4)].

Further, the mortgagee/landlord has the right, and the mortgagor and tenant are obliged to co-operate with such rights, to [Mortgages Act s.50(2)(5)]:
  • enter into the common areas of the residential complex for the purpose of inspection;

  • demand production from the mortgagor or the tenant/s of a copy of the tenancy agreement if it is written; and

  • demand from the mortgagor or the tenant/s any particulars of the tenancy agreement.
Failing the mortgagor's or tenant's compliance with these above rights, the landlord may apply to the Superior Court for orders requiring such compliance [Mortgages Act s.50(6)].

. Landlord's Right to Show "Single Family Home"

A mortgagee/landlord "may on reasonable notice show a single family home that is the subject of a tenancy agreement to a prospective purchaser at reasonable times" [see (b) above for the definition of "single family home"] [Mortgages Act s.55].

(e) Rights and Duties of Tenant

. Overview

As noted above, at the date of Notice of Change of Landlord [see (d) above], the tenant's legal duties - including the duty to pay rent - shift to the new mortgagee/landlord.

Similarly, the tenant's rights under the RTA are established against the new landlord at that time. As well, the tenant's full rights "at common law or in equity" are preserved as against the mortgagee/landlord, despite the mortgage situation [Mortgages Act s.56].

. Duty to Pay Rent

The tenant is partially protected from liability for errors in this respect particularly as may stem from the ambiguity of "mortgagee-in-possession" status: see (c) above], as they are "released from the obligation to pay the rent to any other person unless the mortgagee instructs otherwise or a court orders otherwise" by any good faith rent payments to a mortgagee after mortgage default and service of Notice of Change of Landlord [Mortgages Act s.49].

Basically, if - due to failure of the 'new' landlord to properly give notice of the change - the tenant keeps paying rent to the old landlord, the tenant has discharged their rent-paying duties and it is up to the old and new landlords to sort the finances out between themselves.

. Tenant's Rights Against Mortgagee Not Yet Mortgagee/Landlord
The following rights appear redundant in light of the broader "tenant's rights" granted tenants against landlords under the RTA [see Ch.3 generally]. If however read as applying only against mortgagees before they become mortgagee/landlords [see (c) above] then these provisions can be given independent meaning.
In such mortgage situations, the mortgagee (who is not yet a mortgagee/landlord) or anyone acting on their behalf [Mortgages Act s.51(1)] must not:
  • Vital Services

    "deliberately interfere with a reasonable supply of any service, such as heat, fuel, electricity, gas, food or water to a rental unit or to the residential complex in which it is located, whether or not it was the mortgagor's obligation to supply the service"; or

  • Substantial Interference with Reasonable Enjoyment With Coercive Intent

    "substantially interfere with the reasonable enjoyment of the rental unit or of the residential complex in which it is located for all the usual purposes by the mortgagor's tenant or household with the intent of causing the mortgagor's tenant to give up possession of the rental unit or to refrain from asserting any rights under this Act, the tenancy agreement or the Residential Tenancies Act,2006."
It is a "strict liability" offence to contravene these tenant protections, punishable by up to $5,000 fine for an individual and $25,000 for a corporation [Mortgages Act s.51(2)] [see Ch.17: "Offences"].

(f) Bad Faith Tenancy

The presence of a tenant in premises is awkward for a mortgagee seeking remedies after default, and on occasion mortgagors try to establish such tenancies as a means of discouraging foreclosure or power of sale proceedings by reducing the sale value of the property as a disincentive to such proceedings.

Where this is suspected, the mortgagee may apply to the Superior Court for an order varying or setting aside the tenancy (or tenancies) or any of their provisions [Mortgages Act s.52(1)] "entered into by the mortgagor in contemplation of or after default under the mortgage with the object of:
  • discouraging the mortgagee from taking possession of the residential complex on default; or

  • adversely affecting the value of the mortgagee's interest in the residential complex."
The court, on such an application, "shall have regard to the interests of the tenant and the mortgagee" [Mortgages Act s.52(2)] - and will likely make the tenants parties to the application if they appear and ask.

(g) Personal and Purchaser Possession by Mortgagee/Landlord of "Single Family Homes" Premises

. Overview

A mortgagee/landlord may - in the circumstances explained below - obtain possession of a rental unit that is (or that is in) a "single family home" [see (b) above] mortgage-defaulted premises, for bona fide (good faith) residential use by themselves or their immediate family ("qualifying occupants") - or on behalf of a subsequent purchaser or their immediate family - in accordance with general RTA "personal possession" provisions [see Ch.5, s.2: "Regular Landlord Terminations: Personal and Purchaser Possession"] [RTA s.48, Mortgages Act s.53(1)(2)].

Note that the right of the mortgagee/landlord to obtain possession on behalf of a subsequent purchaser or their immediate family arises only if the mortgagee/landlord has "entered into a binding agreement for the purchase and sale of a single family home" and where the "purchaser ... on closing would be entitled to give notice of termination under [RTA] section 48" [Mortgages Act s.53(2)] (ie. if the purchaser would, once they became the owner, be able to use the general RTA s.48 "personal possession" provisions).
Care must be taken to understand how these mortgage-related "personal and purchaser possession" provisions interact with the similar general "personal possession" [RTA s.48] and "purchaser possession" [RTA s.49] provisions discussed in Ch.5, s.2. While the mortgage-related provisions adopt the general RTA s.48 "personal possession" provisions for both mortgage-related personal and purchaser possession - they do not rely on the general purchaser possession provisions of RTA s.49.

Also note that some aspects of the RTA s.48 personal possession termination provisions are modified below (eg. date of termination availability).
. Qualifying Occupants

The "qualifying occupants" are (as the case may be) [RTA s.48, Mortgages Act s.53(1)(2)]:
  • the landlord or purchaser,

  • the spouse of the landlord or purchaser,

  • a child or parent of the landlord, purchaser or their spouse,

  • a caregiver to any of the above who resides in the same residential complex (though not a "care home" [RTA s.2 "residential complex", RTA s.48(1)(d).
For the above purposes, a "spouse":
RTA s.2(1)
... means a person,

(a) to whom the person is married, or

(b) with whom the person is living in a conjugal relationship outside marriage, if the two persons,

(i) have cohabited for at least one year,

(ii) are together the parents of a child, or

(iii) have together entered into a cohabitation agreement under section 53 of the Family Law Act [such agreements address division of property, support obligations and child-rearing before and after separation].
. Notice of Termination

Contrary to a "regular" personal possession termination [under RTA s.48], these mortgage-related terminations may specify a date of termination "regardless of any fixed term of tenancy" (ie. they may break a fixed term lease) - as long as they provide for at least 60 days notice [Mortgages Act s.53(4)].

The "regular" Notice of Termination form is used, except that where the termination relates to the subsequent purchaser, "it shall be modified to indicate that the mortgagee is obtaining possession on behalf of a purchaser who requires the single family home or any part of it occupied by a tenant for the purpose of occupation by himself or herself, his or her spouse or a child or parent of his or hers or of his or her spouse." [Mortgages Act s.53(6)].

Form N12: Notice to Terminate at End of the Term for Landlord's or Purchaser's Own Use

Normal L&T service rules apply to notices given under these mortgage provisions [Mortgages Act s.57, RTA s.191] [see Ch.13, s.8: "General Board Procedures: Service and Filing of Documents].

. Additional Documentation Where Purchaser Possession

Where the Notice of Termination is served on behalf of the subsequent purchaser, the mortgagee/landlord must obtain from that purchaser "an undertaking in writing that states that the purchaser requires the single family home or any part of it occupied by a tenant for the purpose of occupation by himself or herself, his or her spouse or a child or parent of his or hers or of his or her spouse" [Mortgages Act s.53(3)]. A copy of this undertaking must accompany the Notice of Termination [Mortgages Act s.53(5)].

. Tenant's Right to Earlier Termination

As these mortgage-related personal and purchaser possession provisions allow the mortgagee/landlord to "obtain, under section 48 of the Residential Tenancies Act", possession of the tenant's premises - it appears that such proceedings are also subject to the tenant's RTA s.48 right of earlier termination.

Thus the tenant receiving such a Notice of Termination may opt for any (self-specified) earlier termination date, on ten days notice to the landlord [RTA s.48(3)(4)].

Form N9: Tenant's Notice to Terminate the Tenancy

Essentially this allows the tenant the convenience of moving out earlier if they have found a new premises.

Normal L&T service rules apply to notices given under these mortgage provisions [Mortgages Act s.57, RTA s.191] [see Ch.13, s.8: "General Board Procedures: Service and Filing of Documents].

. Application for Termination and Possession

Either the mortgagee/landlord who served the Notice of Termination (on their own or the subsequent purchaser's behalf), or the subsequent purchaser, may make application to the Landlord and Tenant Board for Orders terminating and evicting the tenant if they do not comply by vacating the premises [Mortgages Act s.53(7)(8)].

Normal L&T service rules apply to notices given under these mortgage provisions [Mortgages Act s.57, RTA s.191] [see Ch.13, s.8: "General Board Procedures: Service and Filing of Documents].

. Court Application Where Bad Faith Termination

This next provision relates to "bad faith" terminations. There is in (unfortunately many) mortgage default situations a strong inclination for mortgagees to seek vacant possession of the premises through whatever means despite the tenant's entitlements. This inclination persists amongst some mortgagees, who seem to think that such antics are somehow unique and not previously tested in law. Trust me, they have been.

To accomodate this persistent inclination, (now former) tenants are entitled, within 180 days of the date of termination specified in the mortgagee/landlord's Notice of Termination (not the date the premises were vacated), to "bring an application to the Superior Court of Justice [not the L&T Board] for an order directing that the tenant has the right to occupy the premises on the same terms that existed immediately before the date of termination.", if "the purchaser does not ... occupy the premises for his or her own use for a reasonable period" [Mortgages Act s.54(1)]. So basically, if the landlord's stated intention to occupy the premises is fraudulent, tenants may seek to re-establish their right of possession.

No such court application may be brought after 210 days have passed since the date of termination specified in the mortgagee/landlord's Notice of Termination[Mortgages Act s.54(2)].
The following additional provision accompany these Mortgages Act s.54 court application provisions:
If the tenant makes an application or is entitled to make an application, and the premises are occupied by another tenant, the original tenant may bring an action against the purchaser to recover any costs and damages incurred as the result of the tenant having to vacate the premises.
This is poorly drafted. Read literally, it establishes a "representative" right of action (ie. a lawsuit - separate from the "application" process) at the hand of the former tenant to recover the subsequent tenant's special damages regarding vacating the premises to allow the former tenant back in possession. A more coherent interpretation may be to read the phrase "original tenant" as referring to the subsequent tenant, though this strains the literal meaning of the phrase.
(h) Rent Deposits and Mortgage Sales

Note that a tenant's rent deposit held by a defaulting mortgagor is the fifth claim in priority on funds realized after power of sale proceedings [Mortgages Act s.27].

The inclusion of the rent deposit in the mortgage proceeds distribution supports the argument that - at least in mortgage situations - the rent deposit is not "transferred" to subsequent holders of the property as a credit to the tenant [see Ch.10, s.5(d): "Rent Fundamentals: Non-Rent Charges and Security Deposits: Security Deposits: Security Deposits and Mortgage Proceedings".].

10. Interim Possession of Proposed Condominium by Purchaser Pending Title Transfer

(a) Overview

Where an agreement of purchase and sale for a proposed condominium (ie. one that is yet unregistered) provides for the purchaser to occupy the unit pending title transfer, and where a charge is made against the purchaser for such occupation, then the purchaser fulfils the legal definition of 'tenant' under the RTA [RTA 2(1) definitions of "tenant" and "rent"]. In such a situation the RTA does apply [Condo Act s.4(2), 80(1)], with the exceptions and qualifications noted below in this section.

Termination proceedings against such purchaser/tenants in possession are addressed in Ch.12, s.7: "Regular Landlord Terminations: Condominium Purchase Fall-through".

(b) Duties of Vendor/Landlord During Interim Possession

While the RTA gives 'regular' condominium landlords and tenants the general rights and duties discussed in Ch.3 ["Tenant Rights, Responsibilities and Remedies"], some of those rights and duties are overridden by the Condominium Act with respect to interim possession of a proposed condominium by the purchaser pending sale. More specifically, the following particular rights and duties prevail over those RTA general rights where they are in conflict with one another [Condo Act s.80(6,7)]:
  • the vendor/landlord must supply the purchaser/tenant with the same services that the condominium corporation will owe to the vendor/landlord;

  • the vendor/landlord must repair and maintain the unit in the same manner that the condominium corporation will owe to the vendor/landlord;

  • the vendor/landlord has the same right of entry into the unit occupied by the purchaser/tenant that the condominium corporation will have against the vendor/landlord;

  • the vendor/landlord may refuse to assign the tenancy, but if they consent they may make "charge a reasonable fee" doing so; and

  • the vendor/landlord must notify the purchaser/tenant of "the date and instrument numbers of the registration" that creates the unit within 30 days of such registration - unless the purchaser's deed is received in registrable form by that time.
(c) Rent, 'Monthly Occupancy Fee' and Other Charges

While such tenancies are exempt from the main rent control provisions of the RTA [Part VII], and from numerous similar other RTA provisions (listed specifically below), the vendor/landlord may charge the purchaser/tenant a "monthly occupancy fee" that may not be greater than the total of the following amounts [Condo Act s.80(4)]:
  • monthly interest on the outstanding purchase price (at a rate prescribed under s.19(1) of the General Regulation under the Condominium Act);

  • a reasonable monthly estimate for the municipal taxes attributable to the unit; and

  • the projected monthly common expenses contribution of the unit.
While this "monthly occupancy charge" meets the definition of "rent" set out in the RTA - and thus attracts application of the termination and eviction for non-payment of rent provisions discussed in Ch.7 ["Non-Payment of Rent Termination"] - non-payment of this charge may practically be more likely addressed as an issue respecting the larger relationship of vendor-purchaser. That is, the vendor/landlord may wish to address such non-payment as breach of the agreement of purchase and sale, rather than as the smaller matter of regaining possession. To facilitate this - and any other break-down in the purhcase agreement - specific termination procedures are on 'condo purchase fall-through' are addressed in Ch.5, s.7: "Regular Landlord Terminations: Condominium Purchase Fall-through".

If however, on non-payment of the charge, the vendor/landlord wishes to proceed with closing the sale regardless, the time required to achieve non-payment of rent-based orders for termination and eviction may run past the date of the sale closure. In that case, the L&T Board proceedings may be moot except for the recovery of the unpaid 'charge' arrears.

Interim possession 'tenancies' and monthly occupation charges are exempt from the following rent and charge-related rules [Condo Act s.80(10)]:
  • all the primary rent control rules of Part VII [these are mostly addressed in Chs.10-12];

  • the rule that multiple leases respecting care home facility rentals (ie. separate agreements for room, common facilities, etc) be treated separately for purposes of rent control - except that this exception is itself excepted for the tenancies discussed in Ch.10.s.6: "Rent Fundamentals: Exemptions from Some Rent Control Provisions" [RTA 149];

  • the rule that increases in care home "care services and meals" must be preceded by proper notice of increase [RTA 150];

  • the rule exempting care home "care service and meals" charges from the illegal charge provisions of RTA 134 [RTA 151] (apparently meaning that the illegal charge provision do apply to such interim occupancies);
    This is an exception couched in multiple negatives; the above is the best interpretation I have been able to give it.
  • the rule respecting purchases of mobile homes in mobile home parks by assignees of the rental unit (ie. the mobile home site) that the landlord may increase rent by the lesser of $50 and the amount of any Board-allowed AGI increase [RTA 165];

  • the rules prohibiting landlords of mobile home parks and land lease communities from charging entry, exit, installation or removal fees greater than their reasonable out-of-pocket expenses [RTA 166]; and

  • the rule that grants the Board, on an AGI application, discretion to spread rent increases based on eligible capital expenditures over more than three years where infrastructure work is required to be done by government [RTA 167].

11. Leasehold Condominium Corporations

A "leasehold condominium corporation" is a condominium developed on leased land (a 'ground lease'), somewhat similar to a 'land lease community' of homeowners [discussed at s.4 above: "Mobile Home Parks and Land Lease Communities"]. However, upon expiration of the land lease ownership of the condominium building and facilities reverts to the land-owner. Such ground leases range in length from 40 to 99 years.

This ground-lease relationship between the land-owner and the leasehold condominium corporation is not governed by the RTA. Of course, the units of such a condominium are still owned by individuals as with a typical corporation, and if they are rented out then they are covered under the RTA [Condominiums Act 1(1), 165(7)] as is otherwise discussed in this Isthatlegal.ca Residential Landlord and Tenant Law (Ontario) Guide.

12. Board Application to Determine Application of RTA

Where uncertainty exists as to which - if any - RTA provisions apply to particular premises, the landlord or tenant may make an application to the Board to have the issue determined [Act s.9(1)(a)]:
RTA s.9(1)
A landlord or a tenant may apply to the Board for an order determining,

(a) whether this Act or any provision of it applies to a particular
rental unit or residential complex
Form A1: Application About Whether the Act Applies
Casenote: Matthews v Algoma Timberlakes Corporation (Ont CA, 2010)

Tenants applied at the Board for a declaration under RTA s.9(1)(a) that the Board could exempt the landlord from specific duties under the RTA, here duties under ss.20 and 161 [which applied to land lease communities by virtue of s.152(2)] to repair, comply with "health, safety, housing and maintenance" standards, remove garbage, provide roads and snow removal, utilities, etc. Presumably these land lease community tenants were happier with an arrangement where they did those things and wanted to avoid any AGI rent increases.

The Court of Appeal agreed with the Divisional Court that no such jurisdiction lay with the Board, and that s.9(1) rather was designed to determine whether any particular premises or use was governed by the RTA in it's entirety - that is, that it was not a discretionary line-by-line exemption authority granted to the Board. As such, the court held that the LL was bound by the repair and service duties.
Case Note: In Copeland & Soucie v. H.M.Q. (Div Ct, 2014) the court held that the existence of the LTB procedure to determine application of the RTA was permissive and did not preclude a court from making similar declarations on an RTA application under the Judicial Review Procedures Act.


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Last modified: 11-08-23
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