Mortgage Broker

legalease CMB MAGAZINE cmba-achc.ca winter 2019 | 31 If a borrower acknowledges liability for the claim before the limitation period has expired, the date of discovery is on the date of the acknowledgement. An acknowledgement occurs either by: n a written and signed document from the borrower to the lender or n the borrower performing an obligation under the mortgage (such as making a payment). If a borrower performs an obligation under the mortgage, the borrower is acknowledging liability for the lender's claim to realize on the security property. If a lender accepts payment from or performance by a borrower, the lender is acknowledging that the borrower has redeemed the security property (that is, negated the lender's right to pursue the security based on the default). If the borrower acknowledges being liable for interest, the borrower is also acknowledging liability for the principal and later interest. e court has discretion to allow a lender's expired claim to be brought, if it is being brought in response to a claim of the borrower (such as counterclaims, third party proceedings, a claim for set-off, or adding a new party as a plaintiff or defendant). Regardless of any other sections of the LA, the maximum time within which a claim can be brought is 15 years from when it was discovered. Leatherman v. 0969708 BC Ltd e sample facts indicated earlier in this article is essentially what happened in Leatherman. e B.C. Court of Appeal decision in that case applied the changes in the LA concerning enforcing defaults to mortgages. It is the highest authority on the subject, the Supreme Court of Canada on October 4, 2018 having declined to hear appeals from the decision. Leatherman demonstrates how important it is to understand whether the wording in the subject mortgage creates demand obligations, contingent obligations or both—the importance being that the limitation clock for each category of obligation is triggered differently. EXAMPLE OF A DEMAND OBLIGATION The mortgage states that the lender can call the entire mortgage balance due if there is a default under the mortgage. The lender needs to make the demand to trigger the amount becoming due. EXAMPLE OF A CONTINGENT OBLIGATION In contrast to a demand obligation is a contingent obligation. A contingent obligation becomes due automatically upon the contingency (that is, the specified event) occurring. For example, the mortgage states that the borrower will pay the lender a specified payment on the first day of each month. The lender need not make any demand to make the payment amounts due. A single mortgage is not necessarily, for purposes of determining limitations periods, entirely a contingent or demand mortgage. Each obligation in the mortgage carries its own classification. For example, if a security is realizable upon default, then the limitation period commences when the default, or right to enforce the security, occurs. If the security is enforceable on demand, then logically the limitation period will commence once the demand has been made, and there has been a default. e result is that a single mortgage can have limitation periods for different obligations start and expire at different times. For example, the mortgage balance might be due on the demand of the lender, monthly payments might be due automatically on certain dates, and the right to enforce the security might be available automatically to the lender upon the borrower's defaulting under the mortgage. e mortgage in Leatherman allowed the lender to choose whether to make the entire mortgage balance due in the event that the borrower defaulted. It said that the lender could issue a demand letter and/ or sue for the amount. e court said that as the balance was not due until a demand was made, the obligation was a demand obligation. e limitation clock did not tick until the demand had been made and there was a default in response to the demand.

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