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Discharging an old mortgage from title

Updated: Feb 23

When a homeowner sells an Ontario property with an old undischarged mortgage on title but can’t find the lender, what can be done? A similar question arises when the mortgage has already been paid off but was never discharged from title.

The owner’s real estate lawyer could try persuading the purchaser to proceed with the sale despite the existence of that mortgage. The purchaser might be satisfied with a statutory declaration from the vendor stating that the mortgage has been fully paid. A vendor may also be satisfied where enough proceeds from the sale are set aside in trust to cover the entire amount of the potential mortgage claimed. If things go awry, the purchaser’s title insurance policy might apply to cover any shortfall.

These proposals, however, will often be rejected, forcing the vendor to obtain a Court order declaring the mortgage discharged. Otherwise, the deal will not close.

Relief is available under the Mortgages Act, R.S.O. Where the mortgage has been paid in full, section 12(8) may apply:

When a mortgagee has died and all money due upon the mortgage was paid to him or her in the mortgagee's lifetime or has been paid to a person entitled to receive the same after the mortgagee's death or where in any other case it appears that all money due upon the mortgage has been paid and for any reason a discharge or reconveyance cannot be obtained without undue delay and expense the court may make an order discharging the mortgage.

In the case where the mortgagee (lender under a mortgage) cannot be found and there may be amounts outstanding, section 12(3) states:

“If a court application is necessary to remove an old mortgage, the lawyers at MZS Lawyers have acted for many clients across Ontario over the years.”

When a mortgagor or any person entitled to pay off a mortgage desires to do so and the mortgagee, or one of several mortgagees, cannot be found or when a sole mortgagee or the last surviving mortgagee is dead and no probate of his or her will has been granted or letters of administration issued, or where from any other cause a proper discharge cannot be obtained, or cannot be obtained without undue delay, the court may permit payment into court of the amount due upon the mortgage and may make an order discharging the mortgage.

A mortgagor (borrower under a mortgage) can also seek relief under Ontario’s, Real Property Limitations Act, R.S.O. which provides that after 10 years from the date of the last payment or written acknowledgement of the debt, a mortgagee is time-barred from collecting on the old mortgage. The limitation period under the Real Property Limitations Act is meant to prevent old and forgotten or forgiven mortgages from hanging over the head of the borrower indefinitely. Even so, in the absence of the lender’s consent, a mortgagor will need obtain a Court order declaring the mortgage discharged before it can be deleted from title in Ontario’s Land Titles System.

So, when it comes to dealing with an old mortgage, confirm its status before putting your home up for sale. Otherwise, alert your real estate lawyer as soon as the issue comes to your attention.

MZS Lawyers are experienced Ottawa property dispute lawyers that can assist with removing old mortgage from title, or correcting other defects affecting title. We can bring an application in any court location in Ontario on a cost effective basis. Email to discuss your options.

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