I have had several cases recently where an owner owns a parcel of land (parcel A). He mortgages it to a bank. He then acquires additional land, be it as a small lot addition or in one case, filled land that was used for part of a marina. We will call this lot addition parcel B. In each case, the lawyer registered a mortgage identical to the existing mortgage on the recently acquired parcel B. In each case, the loan went into default and the lender sought to realize on his mortgages. Of course, each of the lot addition mortgages breached the Planning Act since at the time the mortgage was given, the owner owned abutting land. The intention was clear but the execution of the intention was in error. Instead of a new mortgage on the lot addition, the lender needed a whole new mortgage on all of the land then owned by the owner i.e. both parcels A and B. In lot addition cases in particular, where the lot addition may be transferred to the owner with a consent, it is likely that the consent will be stipulated under subsection 50(12) of the Planning Act such that the consent applies to the transfer of the land to the owner but is not available for the mortgage on the lot addition parcel. Just because parcel B was transferred with consent does not mean it is a separate parcel for all time. If B is intended to merge with the main parcel A, then mortgage on the lot addition alone will breach the Planning Act.
Originally published November 2014
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