But if the mortgagee does not take possession it seems, according to last week's Superior Court decision in Bank of Montreal v. Smith, 2008 CanLII 28435 (ON S.C.), that the tenant is not protected.
The mortgagee can have the residential lease held void -- which may be seen as curious since such lease would be binding against a new owners buying the property from the mortgagee under a power of sale. (Quaere -- the declaration would "wash" the title and allow a purchaser under a power of sale to obtain vacant possession?)
An unspoken sub text to the case may be that the lease in Smith, while apparently valid, was grossly under market.
The Court writes:
[36] The Bank, in the case at bar, did not obtain title to the residential complex by foreclosure or power of sale. The issue therefore is whether the Bank is a mortgagee in possession. If the Bank is a mortgagee in possession, then the applicant is deemed by s. 47 of the Mortgages Act to be a landlord under the tenancy agreement.
[37] Falconbridge on Mortgages (5th ed., May 2007), at pp. 31-32, states that a mortgagee becomes a mortgagee in possession where the mortgagee:
... deprives the mortgagor of the control and management of the mortgaged property. A mere token taking of possession such as erecting a barricade is not sufficient to place the mortgagee in possession, especially where the mortgagee does not contemplate any advantage from the taking of possession.
[38] Mr. Smith asserts that because the Bank's agent attended at the property and attempted to secure any vacant units, the Bank has become a mortgagee in possession. The fact is, as Mr. Smith agreed in cross-examination, the locks have not been changed. There is no evidence that the Bank has interrupted or interfered with the mortgagor's control and management of the property by preventing the mortgagor from selling the property.
[39] Have the rents been attorned by the mortgagee? As Falconbridge states in the excerpt noted above, the mortgagee may if it is entitled to possession as between itself and the mortgagor take possession by requiring the tenant to pay the rents and profits to the mortgagee or its agent instead of paying them to the mortgagor. In this case, the Bank has not attorned rent. Mr. Smith, in his cross-examination, confirmed that he is not paying rent to the Bank.
[40] The cases relied on by Mr. Smith, namely, Premier Trust Co. v. Heckhausen, 37 R.P.R. (2nd) 165; Unican Development Corp. v. Settlers Savings & Mortgage Corp., [1984] A.W.L.D. 139, are all distinguishable. They are cases where the mortgagee attorned rents or otherwise asserted control over the lands and premises. Sun Life Trust Co. v. R., [1998] G. S.T.C. 63, another case relied on by the respondent, is a case decided by the Tax Court of Canada. Sun Life Trust Co. involved the appellant's entitlement to a tax credit which turned on whether the appellant mortgagee had taken possession of property before November 1990. If the appellant mortgagee was in possession prior to that date, it was not entitled to a tax credit. The headnote accurately and succinctly sets out the ratio of the case as follows:
Appeal dismissed. A mortgagee takes possession by taking such steps as are necessary to deprive the mortgagor of the control of the property. In this case, the mortgagee instructed its lawyers to take control of and manage the property to the exclusion of the mortgagor. That is, the mortgagee had intercepted the owner's right to manage its property by November 1990, which was before the window period during which subsection 183(7) could have provided a credit.
[41] In this case, there is no evidence that the mortgagee has taken out of the mortgagor's hands the control and management of the mortgaged premises. It has neither entered into actual occupation nor obtained the receipt of the rent of the mortgaged premises.
[42] I am satisfied on the evidence before me that the applicant mortgagee is not and has not been in possession. The cases noted and the authorities cited therein provide ample support for this conclusion.
[43] I therefore conclude that the applicant, not being a mortgagee in possession, is not deemed to be the respondent's landlord pursuant to section 47 of the Mortgages Act? The respondent's unregistered 10-year lease is not protected by virtue of s. 47 of the Mortgages Act.
3 comments:
This is exactly the sort of weak knee liberal judge decision that makes my blood boil. Have these guys never even read the RT Act? Jeez!
Steaming -- what are you smoking? This is capitulating to the banks! It's a hard right decision -- it just shows the judges are in the banks pocket!!!
zzzzzzzzzzzzzzzzzzzzz
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