foreclosing
54 | winter 2017 cmba-achc.ca CMB MAGAZINE
t the time a mortgage is funded, a lender sometimes provides a cashback amount to
the borrower. Generally, the borrower is not required to repay the cashback amount
if the mortgage remains outstanding for the agreed-upon term; if the mortgage is
paid out early, the lender may require the borrower to repay all or a portion of
the cashback amount.
But what happens if the mortgage goes into default and the lender starts
foreclosure proceedings? Can the lender claim return of the cashback amount
as part of the mortgage debt secured by the mortgage and owing in the
foreclosure proceedings?
It depends on the legislation of the relevant province and the wording
of the mortgage documents in the specific transaction. To provide you with some guidance, we
will look at some general principles and a recent Supreme Court of Nova Scotia case.
Some General Principles
A mortgage can secure more than one obligation of the borrower. For example, it can secure the
principal and the cashback amount to be repaid. Whether the cashback amount in a specific case
can be considered part of the mortgage debt depends upon:
n
whether the mortgage legislation and rules of the relevant province's court provide that a
cashback can be part of a mortgage debt; and
n
whether the mortgage documentation in the specific transaction provides that the cashback
amount is part of the mortgage debt.
As to the first bullet, mortgage law differs across the provinces; small differences in the
wording of the law can lead to different results.
Is a foreclosing lender limited to recovering
only principal, interest and costs?
BY RAY BASI, LL.B.
STAFF, EDUCATION AND POLICY REVIEW
A
Getting Back
Cashback
the
