How do you enforce an unregistered mortgage?

Lenders are increasingly accepting unregistered mortgages as collateral for loans. While an unrecorded mortgage provides the lender with priority over any borrower’s unsecured creditors, it does not give the lender the same rights or benefits as a registered mortgage.

Depending on the circumstances, an unregistered mortgage may take precedence over subsequent unregistered mortgages and any unsecured creditors. However, it does not take precedence over any existing registered mortgage or preclude the holder of an existing registered mortgage from extending additional funds to the borrower. An unregistered mortgage holder may have the authority to appoint a receiver and manager to the property, who can sell the property, depending on the mortgage contract conditions. On the other hand, a receiver and manager do not have the same authority as a mortgagee in possession to override the interests of different lenders on the title. As a result, they may have trouble selling the property.

 

The holder of an unregistered mortgage may petition the Supreme Court for an order enforcing the conditions of the unrecorded mortgage and securing the sale of the property. However, the court will have broad discretion in granting such a request. The court may refuse to give the order if the lender has acted unethically.