How Does Real Estate Security Differ Between Canada and the U.S.?
A few days ago, I blogged about one of the key differences between taking security in Canada, as compared to the US (a question I'm often asked by lenders when working on cross-border M&A transactions). As a follow up to that post, I'm going to discuss one other reason why lender rights are generally a bit more robust in Canada than in the US – that is, the option of private power of sale that's available in Ontario.
A private power of sale in Ontario allows a lender to (on not less than 15 days after default and 35 days notice) sell the property it has taken security over without having to go through a foreclosure procedure—i.e., without any judicial intervention! In the US, the remedies essentially always include a foreclosure remedy, which results in at least some level of judicial intervention. As such, the private power of sale proceeding is a very attractive remedy for many real estate lenders in Ontario.
In addition, in Ontario and all other Canadian common law jurisdictions (i.e., every province other than Quebec, which has its own unique system), foreclosure and judicial proceedings are available. In most cases these are great options for lenders, as they are judicially supervised and free the lender from liability (or action from the debtors) with respect to the amount of sale proceeds. These proceedings also tend to be completed in a fraction of the time a similar process might take in the US, which is another attractive feature of the Canadian real estate lending market.
As you can see, US lenders can benefit from enforcement proceedings (though much rarer in Canada than in the US) taking considerably less time to play out than they otherwise might in the US. What's not to love about that? To learn more about features of Canadian law, see our publication, Doing Business in Canada 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.