“When a mortgagor (borrower) defaults under a mortgage, the mortgagee (lender) usually has several remedies he can use, but he will almost always sell the property, either under the Power of Sale legislation or after foreclosing on the mortgage (see sections 12.9.1 and 12.9.2). Some of the remedies available to the lender upon default are described below.
- Acceleration. Move the due date of the debt forward by requesting payment of the interests past due and the whole of the principal.
- Possession. If a mortgage is in default, a mortgagee may obtain possession of the property by removing the owner mortgagor from the property and taking possession, while leaving the tenants in place. Usually, a writ of possession obtained from a court (see Figure 12.5) is required to gain possession.
- Attornment of Rents. An attornment is a written order issued by a court, commanding the party to whom it is addressed to perform or cease performing a specific act. Frequently, a mortgagee does not want to remove the owner and take his place. Usually, when there are tenants, a mortgagor is forced under the implied charge terms to “attorn” to the mortgagee. This consists of the mortgagor becoming the manager of his building for the mortgagee and turning over to the mortgagee the the rentals received from the tenants. It requires the serving of a notice to the mortgagor and his tenants. Under the circumstances of possession and attornment, mortgages are said to be “mortgagees in possession”.
- Action on the Covenant (to pay). The mortgagee (lender) can sue the mortgagor for payments generally obtain a judgement quickly. Indeed, the mortgagor who signed the mortgage document remains liable on his obligations to repay the loan, but most of the time he has no money. It is one of the remedies, among several, that a mortgagee may use in the case of non-payment of a mortgage. “Pierre Boidon and Claude Boidon, Commercial Real Estate Investing in Canada, John Wiley & Sons Canada, Ltd., 2008, pg 286”
