When a lender and borrower enter into a financial arrangement known as a mortgage where real property is used as security for the loan, each party has certain mortgage contract terms under that agreement.
These obliguations are referred to as Standard Charge Terms. This a official document that is specially designed by the Mortgage Lender and will have to be submitted and registered with the Director of Titles under the Land Titles Act. Some generic Standard Charge Terms can be viewed at: https://www.teranetexpress.ca/content/tvuser/schedules/peoplesunion/Standard_Charge_Terms_201022.pdf
The document that is registered will now be the mortgage contract and contains detailed information on the lender’s and borrower’s obligations, referred to as covenants, as well as the solutions readily available to the lender if the borrower does not meet their responsibilities. A covenant is a pledge to do or not do something depending upon the terms of the agreement. In a mortgage contract, both the mortgagee (lender), and mortgagor (borrower), have terms that each must follow.
It is very important for the borrower to be aware of, while at the lawyer’s office finalizing the documentation to register the mortgage, the acceptance of the Standard Charge Terms being also signed. Many borrowers neglect to consider is that they have Standard Charge Terms on their mortgage and that they describe the legal rights and duties of the borrower. Negating the mortgage contract terms of this agreement is considered default and allows the lender exercise their rights.
The preceding is a description of each of the mortgagor and mortgagee covenants as detailed in the Standard Charge Terms of a mortgage.
When a borrower promises their real property as collateral for a home finance loan by placing a mortgage on that property they have five critical duties:
- Repaying the loan – The borrower agrees to payback the mortgage based on the payment itinerary outlined in the finance agreement.
- Insure the property – The borrower agrees to maintain appropriate property insurance to protect the lender in case of a fire or other damage.
- Maintain the property – The borrower consents to maintain the property in good condition and this includes repairing the property if required.
- Not to commit waste – Waste is a legal terminology which encompasses behavior or conduct that could result in damage to the property and a subsequent loss in property value.
- Pay Property Taxes – The borrower is obligated to pay their property taxes. If the borrower does not, the lender can pay the taxes and add them to the borrower’s mortgage. The lender can also find the borrower in default for not paying the taxes. Municipalities can register a lien against the mortgaged property for delinquent taxes. This lien will take priority over any other mortgages registered on title decreasing the lender’s security.
The mortgagee, or lender, also has various covenants by which they must abide:
- Provide a Certificate of Discharge – Once the mortgage holder has received funds that are adequate to entirely repay the remainder of the mortgage, the mortgagee is required to provide the borrower with a Certificate of Discharge. This will indicates that the total amount financed has been paid back. The mortgage holder does not have to register this certificate of discharge on title. This means that the borrower is in charge of having this certificate registered. If the mortgage is being refinanced by another lender, the new lender will have their Solicitor finalizing the mortgage register the certificate of discharge right before they register their new charge.
- Assignment of the mortgage – The mortgagor has the right to request that the mortgage holder assign the mortgage to a new lender as long as the mortgage is in good standing.
- Provide Quiet Possession – Quiet Possession is a legal term that reflects the right of the borrower to have ownership of the property totally free from intermeddling by the mortgage holder other than when in default.