CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
assistance is not directly prohibited or restricted by statute, directors must observe their fiduciary duty to act in the best interest of the corporation when approving such arrangements. In addition, when dealing with non-individu - als (ie, corporations, trusts, partnerships), the organisational documents may contain restric - tions or limitations on certain activities. 3.6 Formalities When a Borrower Is in Default Available Remedies In the common-law provinces, remedies for mortgage lenders generally include foreclosure, action on the covenant, appointment of a receiv - er, judicial sale, power of sale and possession. Power of sale is a sale of the mortgaged property by the mortgage lender without court proceed - ings or supervision, pursuant to either the provi - sions of the mortgage which expressly grant the lender the power to sell the mortgaged property upon default, or the applicable mortgage legisla - tion (a power of sale is not available as a remedy in all common-law provinces). In Quebec, analo - gous remedies include a personal right of action against the debtor, as well as the hypothecary rights of taking in payment, sale by a secured creditor, sale by judicial authority and taking possession for the purposes of administration. A lender is obliged to give “reasonable notice” before making a demand for payment and will generally be required to send notices under federal bankruptcy legislation before seeking to enforce its security over the interest in land. In Ontario, New Brunswick, Prince Edward Island and Quebec, the lender is free to sell the prop - erty privately by a prescribed process, while reserving the right to sue the borrower for any deficiency in the sale proceeds. In British Colum - bia, Alberta, Ontario and Quebec, the lender can
sue for foreclosure (resulting in title to the prop - erty passing to the lender in full satisfaction of the debt). More commonly, most provinces also permit a lender to apply to court for a judicial sale of the property, with the borrower remaining liable for any resulting deficiency. While lenders will often seek to find a commer - cial solution for problematic loans (including by way of forbearance), in an environment of higher interest rates and reduced access to capital for some real estate investors, it appears that lend - ers are more willing in the current climate to pur - sue enforcement of their security. Timeframe The range of time for a lender to successfully enforce and realise on real property security will be highly fact-dependent, however, three to six months would not be unusual in uncontested cases where there is little to no equity in the pro - ject. While court closures and access restrictions resulting from the pandemic may have resulted in enforcement delays, legislation restricting a lender’s ability to foreclose or realise on collat - eral has not been implemented. 3.7 Subordinating Existing Debt to Newly Created Debt Certain statutory liens for property taxes, pen - sion deficits, construction liens or other statu - tory remittance obligations may have priority over secured debt, even if the secured debt was registered/perfected prior to creation of the lien. Otherwise, debt secured by registration may generally only be subordinated to new debt by agreement of the existing secured party. 3.8 Lenders’ Liability Under Environmental Laws Holding security will not generally expose a lend - er to environmental liability, although the value
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