Originally published in Blakes Bulletin on Real Estate
Mortgage Enforcement, October 2008
Prohibition against taking further proceedings
Section 42 of the Mortgages Act (Ontario) prevents a
lender from taking any further proceedings to enforce a mortgage
(without court approval) during the currency of a demand for
payment of money secured by the mortgage or the time specified for
payment in a notice of sale. In other words, no further proceeding
and no action to enforce the mortgage are to be taken until the
period of time specified in the demand for payment or notice of
sale has elapsed.
Two basic concerns prompted the enactment of Section 42. First,
the legislature wished to prevent the lender from incurring
unnecessary costs of enforcement which would be passed on to the
borrower. Second, the legislature wanted to ensure the borrower
would have the benefit of the notice period without being subjected
to a multiplicity of other actions or proceedings.
What constitutes a "Further Proceeding"?
The courts have broadly interpreted Section 42 and have
determined that each of the following acts constitutes a
an attempt by the lender to recover possession of the mortgaged
premises – if control of the mortgaged property is vital,
it may be more prudent for the lender to take possession of the
mortgaged property prior to issuing a notice of sale;
serving a notice of attornment on a tenant;
entering into an agreement of purchase and sale with respect to
the mortgaged property, even if the agreement is conditional upon
the non-redemption by the borrower;
the service of a statement of claim;
the publication of an advertisement by the lender announcing
the impending auction sale of the mortgaged property;
the putting up of posters and placing of newspaper ads to
advertise the sale of the mortgaged property;
listing the mortgaged property for sale with a real estate
preparing the statutory declarations referred to in Section 35
of the Mortgages Act (Ontario) and having the same
approved by the land registry office; and
obtaining appraisals of the value of the mortgaged
What does not constitute a "Further Proceeding"?
The courts have held that the assignment of a mortgage by the
lender after issuing the notice of sale is not a further proceeding
to enforce the mortgage, as an assignment does not hinder or
prejudice the right of redemption or increase the borrower's
costs of redemption.
Section 42 also does not preclude informal discussions with a
real estate agent about selling the mortgaged property in general
terms where no listing is promised and such action does not
interfere with the borrower's right to redeem.
Section 42(3) creates exceptions for proceedings to prevent
waste or other injury to the mortgaged property. The problems
raised by Section 42 may also be readily dealt with by an
application for a court order pursuant to Section 42(2).
Consequences of taking further proceedings
The result of a contravention of Section 42 is that the notice
or demand will remain valid but further proceedings commenced
during the currency of the notice or demand will be set aside as
invalid. Once a notice exercising power of sale has been given, it
cannot be abandoned in order to circumvent Section 42. Accordingly,
for obvious reasons, both lenders considering enforcement as well
as lenders in the midst of enforcement proceedings must be mindful
of the significant consequences of taking "further
proceedings" in violation of Section 42.
Given the consequence that further proceedings commenced during
the currency of a notice or demand will be set aside as invalid,
lenders should be ever vigilant that they are not taking
enforcement steps and incurring costs that contravene Section
A lender can expect both the borrower and subsequent
encumbrancers to attack the lender's sale process if a notice
or demand was given by the lender and such notice or demand had not
yet expired at the time the notice of sale was issued. If the time
stated in the demand had not expired, Section 42 may permit the
borrower or a subsequent encumbrancer to apply for a declaration
that the further proceeding is a nullity. This will inevitably
prejudice and delay the lender's opportunity for a timely and
full recovery of the indebtedness.
With a prudent initial evaluation and decision of the
appropriate ordering of the steps in the lender's enforcement
strategy, such hiccups can be minimized and frequently avoided
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.
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