THE BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
• exercise its power of sale of the property to a third-party purchaser without judicial sanc - tion; • seek (voluntarily, and not by requirement of law) judicial sanction of the sale of the prop - erty to a third-party purchaser; or • apply to the courts for a Foreclosure Order, which would extinguish the borrower’s right to redeem the mortgage and result in abso - lute ownership by the lender. Under the Conveyancing and Law of Property Act, 1909, a lender is entitled to exercise the power of sale (the most common and expedient remedy used by lenders) under one of the fol - lowing circumstances: • notice requiring payment of the mortgage money has been served on the borrower, and default has been made in payment of the mortgage money, or of part thereof, for three months after such service; • some interest under the mortgage is in arrears and unpaid for two months after becoming due; or • there has been a breach in observing or performing some provision contained in the mortgage deed or in the Act, on the part of the borrower or of some person who agreed to arrange the mortgage, other than and besides a covenant for payment of the mort - gage money or interest thereon. Formal written notice of default is required to be served under any mortgage, and the notice period would be stipulated in the mortgage. It is also not uncommon for a mortgage to stipu - late shorter default timelines in substitution for the above provisions of the Act, although, in the case of mortgaged properties that constitute a borrower’s primary residence, certain required procedures and minimum notice periods must
be complied with under the Homeowners Pro - tection Act, 2017. 3.7 Subordinating Existing Debt to Newly Created Debt A legal mortgage or debenture should be record - ed in the Registry of Records in order to preserve priority against subsequent encumbrances. It is possible for a secured lender with senior prior - ity, as a commercial business decision, to con - tractually agree to subordinate its debt and/or a newly created debt to another lender. A subse - quent action for foreclosure can be brought by any lender of property, whether it is the first or subsequent lender. 3.8 Lenders’ Liability Under Environmental Laws A freehold or leasehold mortgagee who is not in possession would not be liable for environmental damage, provided that the mortgagee has not itself caused damage to the property. Where a mortgagee is responsible for the actual damage, they would be liable for the remediation costs and fines. 3.9 Effects of a Borrower Becoming Insolvent Valid security interests created in favour of a lender do not become void if the borrower becomes insolvent, and a lender may exer - cise the remedies granted under a debenture or mortgage (see 3.6 Formalities When a Bor- rower Is in Default ), regardless of the borrower’s solvency. Typically, a properly drawn mortgage would reflect that the insolvency of the borrower (or the commencement of such proceedings that are not subsequently stayed) would be deemed to be an act of default and entitle the lender to exercise its remedies under the mortgage.
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