Condominium corporations are tasked with the difficult responsibility of managing the property and assets of the corporation on behalf of the various condominium owners and balancing the competing interests and needs of such owners.<\/p>\n\n\n\n
What happens in the scenario where a unit owner is in default of the mortgage registered against their condominium unit, and the responsible mortgagee reaches out to seek assistance from the condominium corporation in enforcing its rights, be it by requesting that the condominium corporation grant the mortgagee access to the unit, bar the registered unit owner from further accessing the unit, or otherwise?<\/p>\n\n\n\n
What duty, if any, does the condominium corporation owe to such a mortgagee, and how can any such duty be balanced against the competing interests of the defaulting unit owner?<\/p>\n\n\n\n
In light of the continued impact of the COVID-19 pandemic on the employment and financial security of many Ontarians, it would not be surprising if condominium corporations face scenarios of this nature more often in the future. It is, therefore, important for condominium corporations to be aware of their potential responsibilities and obligations.<\/p>\n\n\n\n
It is of no dispute that a condominium corporation owes a duty of care to the registered owners of mortgaged condominium units. When we look at the Condominium Act, 1998 <\/em>(the \u201cAct<\/strong>\u201d), the term \u201cowners\u201d is defined to \u201cinclude a mortgagee in possession.\u201d Case law confirms that in the event of a \u201cmortgagee in possession\u201d with respect to a mortgaged condominium unit, the registered owner does not \u201close\u201d its ownership designation. Rather, the registered owner as well as the \u201cmortgagee in possession\u201d are considered concurrent owners for the purposes of the Act. Therefore, the condominium corporation owes a duty of care to both parties as concurrent owners.<\/p>\n\n\n\n If approached by a mortgagee, a condominium corporation should first determine whether or not such mortgagee is in fact a \u201cmortgagee in possession.\u201d While there is no statutory definition of the term \u201cmortgagee in possession,\u201d this term has been investigated thoroughly by the courts in Ontario, which have established some basic principles that are helpful for our purposes, namely:<\/p>\n\n\n\n The test for whether or not a mortgagee is a \u201cmortgagee in possession\u201d is a question of fact, depending on the unique circumstances of each case. It is not enough for a mortgagor to be in default of the mortgage. Therefore, a condominium corporation should require evidence more substantial than simply proof of mortgage payment arrears to establish a mortgagee\u2019s position as a \u201cmortgagee in possession\u201d and, therefore, an \u201cowner\u201d under the Act. Rather, a mortgagee must be able to demonstrate that it has taken active steps to deprive the unit owner of the control and management of the mortgaged unit.<\/p>\n\n\n\n When approached by a mortgagee purporting to be a \u201cmortgagee in possession\u201d and requesting the condominium corporation\u2019s assistance in enforcing its rights against the registered owner of the mortgaged unit, it is important for the condominium corporation to first confirm whether or not the mortgagee is, based on the facts at hand, a \u201cmortgagee in possession.\u201d<\/p>\n\n\n\n If yes, then the condominium corporation must tread carefully to respect and honor its duties to both the registered unit owner and the \u201cmortgagee in possession\u201d as concurrent owners under the Act. For example, when contacted by a bona fide \u201cmortgagee in possession,\u201d it is recommended that the condominium corporation clearly and promptly communicate with such party that it is in a position of competing obligations and, therefore, unable to choose sides or take any action that would be contrary to the interests of the registered owner.<\/p>\n\n\n\n A mortgagee may take possession of property upon a mortgagor\u2019s default, provided it is able to do so peaceably. <\/em>If the \u201cmortgagee in possession\u201d is unable to gain or maintain possession of the mortgaged unit peaceably<\/em>, then its only available recourse is to apply to the Superior Court for an order to enforce same. There is no positive obligation contained within the Act or the Mortgages Act<\/em> that compels the condominium corporation to assist the \u201cmortgagee in possession\u201d in enforcing its rights against the registered owner of the mortgaged unit. Rather, there is only an obligation not to interfere with the exercise of such rights by the \u201cmortgagee in possession.\u201d Therefore, unless and until such an order is obtained and provided to the condominium corporation, which specifies the actions the condominium corporation is obliged to take with respect to the registered owner\/the mortgaged unit, the condominium corporation should be reluctant to take any action upon request to do so by the \u201cmortgagee in possession\u201d that would be contrary to the registered owner\u2019s rights (for example, by deactivating access fobs, denying entry to the condominium complex, etc.).<\/p>\n\n\n\n Furthermore, absent a court order compelling it to act, the condominium corporation may simply advise the mortgagee to seek assistance from law enforcement officers concerning their rights regarding the mortgaged unit (for example, on the basis of trespass).<\/p>\n\n\n\nWhen is a mortgagee considered \u201ca mortgagee in possession\u201d?<\/h2>\n\n\n\n
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How does a condominium balance competing interests of a \u201cmortgagee in possession\u201d and a registered owner?<\/h2>\n\n\n\n
When may a condominium corporation accept common expense payments from a mortgagee?<\/h2>\n\n\n\n