Mortgage Broker

38 | fall 2017 cmba-achc.ca CMB MAGAZINE legalease conduct. You need to ensure your words and deeds do not amount to unintentionally holding out a person as your agent or giving the person broader agency powers than you intended. You need to ensure that third parties are made aware of the limitations of your agent's authority. (Spring 2017 issue, page 25; Winter 2014 issue, page 38) Commissions to Unregistered or Unlicensed Brokers You should pay commissions only to persons who are duly registered/licensed, unless the person's activities do not trigger the need for registration/licensing. An agreement to pay a commission to a person who needs to be registered/licensed might constitute an illegal contract (because regulatory statutes make it an offence to provide mortgage brokering services without obtaining due registration) and therefore be unenforceable. at said, where the person's activities do not trigger the need for registration, the contract is not an illegal one and a commission contract may be enforceable. (Fall 2015, page 31; Fall 2014, page 30) Gifts vs. Loans Disputes oen arise as to whether financial assistance a person provides to the borrower was a gi or a loan. e difference can have an impact on the borrower's ability to repay your loan. e law resolves such disputes based on presumptions and any documentation available to overcome applicable presumptions. To avoid becoming entangled in such disputes, a private lender would do well to require that the source of the down payment be verified and its status as a gi or loan be documented. (Spring 2014, pages 36 and 39) Promissory Notes While funding a loan pursuant to a promissory note can appear to be a simple transaction, it can sometimes trigger the need for the lender to obtain registration under provincial securities legislation. (Summer 2016, page 14; Spring 2017, page 50) Use of Existing Appraisals An appraisal generally contains clauses as to who is authorized to rely on it and the purpose for which it can be used. Before relying on an existing appraisal, a private lender should obtain a transmittal letter from the appraiser (that is, a letter authorizing use of the appraisal). Alternatively, a new appraisal should be ordered by the private lender. (Spring 2017, page 21) Mortgaging Undivided Land A part of a legal parcel of land can be mortgaged, but there is no shortage of pitfalls for the lender in doing so. You would be hard- pressed to find a land registry in any province that would register such a mortgage; hence, a subsequent charge-holder not aware of the mortgage might not be bound by its priority. Your mortgage could end up being enforceable only between you and the borrower. (Winter 2015, page 39) Mortgaging Strata Property A lender should thoroughly review a strata's bylaws before accepting a strata unit as security. e bylaws might include restrictions such as a minimum age requirement for residents or a maximum number of units that can be rented at any given time. ese restrictions would be, subject to obtaining an exception, binding on a person who took ownership of the property in the foreclosure action (including a buyer or the lender) and can limit the marketability of the unit. ese bylaws might make the unit unsatisfactory security for the lender. (Fall 2016, page 45) Property Disclosure Statements A private lender should not unduly rely upon a property disclosure statement (PDS) provided by the seller of the property, rather than doing her own diligence. ere is no legal obligation on a seller to provide a PDS. e PDS can be unreliable because the generic language on the form is confusing – easily misunderstood by the seller and/or the person reviewing it. Sometimes the statement is incomplete because the seller honestly forgot to include some facts; the statement might even come with the qualification that it was completed to the best of the seller's knowledge. In other instances, a seller will simply lie to obtain the sale. (Summer 2015, page 37) Marijuana Grow Operations A marijuana grow operation (MGO) presents a challenge for private lenders, whether the grow op exists at the time of funding or comes into existence during the term of the mortgage. e MGO is accompanied with major property damage and stigmatization of the property. If the property becomes registered with the government as a contamination site, the remediation process can be expensive and lengthy. If the government decides the property was purchased with proceeds of unlawful activities or is used for unlawful purposes, the government can seek forfeiture. An innocent lender can seek protection in the proceedings, but the process is oen expensive and time consuming. (Summer 2015, pages 22 and 29) Chattel and Fixtures A private lender needs to have some certainty as to the value of the security property, but sometimes it is difficult to know what is included as part of that property. Chattels are not considered part of the land and are not included, but fixtures are considered part of the land and are included. Whether an item is a chattel or a fixture is based on factors such as how it is attached to the land. is can become particularly significant if an expensive it can sometimes trigger the need for the lender to obtain registration under provincial securities legislation. ( 2016, page 14; Spring 2017, page 50 MGO is accompanied with major the proceedings, but the process is oen expensive and time consuming. (Summer 2015, pages 22 and 29 Chattel and Fixtures A private lender needs to have some certainty as to the value of the security property, but sometimes it is difficult to know what is included as part of that property. Chattels are not considered part of the land and

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