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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

Canada

New Brunswick

Mortgages and Debentures are both recognized for consensual financing on the security of land in the Province of New Brunswick. Under the New Brunswick Land Titles system, since a Deed of Trust is not one of the prescribed forms for use under the regulations, a special exemption will be required to be obtained from the Registrar of Land Titles prior to its use.

SECURITY INSTRUMENTS USED

The Land Titles Act, S.N.B.1981, c. L-1.1, (“LTA”), governs the recording of mortgages in the Province of New Brunswick. It provides for the registration of title to land as well as instruments related thereto within the province and provides statutory authority for certified land title. Mortgages are recorded electronically by a registered user (“Registered User”). A Registered User is a member in good standing of the Law Society of New Brunswick who has entered into a subscription agreement with Service New Brunswick for the purposes of carrying out such on-line registrations. On-line registration is done in accordance with an established protocol jointly formulated and agreed to between Service New Brunswick and the Law Society of New Brunswick. Except as against the person making the mortgage, no mortgage shall, until registered, render the land liable as security for the payment of the mortgage loan. An exception to this general rule is in the case of fraud wherein the holder of a registered instrument has participated or colluded. Knowledge on the part of a person contracting, dealing with or taking an interest in registered land from the owner thereof of an unregistered instrument or claim that is in existence shall not of itself be imputed as fraud. LTA &sect;&nbsp;61 (2). To be valid, the instrument being registered must be completed on a form prescribed by regulations issued under the LTA and the contents of the instrument must include: an approved Parcel Identification Number (“PID”) - see below * -; names (determined in accordance with rules set out in the regulations under the LTA) and mailing addresses for all the parties thereto, and any additional details necessary in order to complete the prescribed form. *Only parcels of land that have been previously migrated to the Land Titles System may be conveyed, transferred, and/or mortgaged, and a comprehensive mechanism is provided under the LTA for a Registered User to carry out the migration process to bring the parcel under the LTA regime. This process essentially consists of an on-line application verifying the state of the title as to current title holders, applicable encumbrances, and confirmation of having completed a title search for a minimum period of 40 years and having obtained from the current registered title holder(s) a sworn (or affirmed) written declaration as to their individual or corporate held title interests in the subject parcel.

RECORDING REQUIREMENTS

UNUSUAL TREATMENT OF STANDARD PROVISIONS

In accordance with the provisions of the Property Act, R.S.N.B. 1973, c. P-19, &sect;&nbsp;47(3) (“Property Act”), lenders under a secured mortgage loan have a valid and enforceable secured claim to be reimbursed for costs, charges and expenses properly incurred with respect to the enforcement of their mortgage security.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL, INCLUDING PAYMENT OF TAXES AND INSURANCE

Assignment of rent is governed by the both the LTA and also the Personal Property Security Act, S.N.B. 1993, c.P-7.1. (“PPSA”), with respect to proceeds. A lease constitutes an interest in real property, so a mortgagee may register a collateral security interest against the rental income being earned by the mortgagor under the terms of the lease. The mortgagee, by virtue of its assignment of rent collateral security, is thus entitled to the rental income in the event of a default.

ASSIGNMENT OF RENT

The LTA does not have a prescribed form for a Deed of Trust. Lenders are encouraged to use Debentures as a substitute. In particular situations, where a financing is multi-jurisdictional, a lender may request a special exemption for the use of such an instrument in order to secure an obligation and thereby render the property liable as security for the payment of money.

PRACTICE IN NEW BRUNSWICK

CORPORATE OR INDIVIDUAL

RESIDENCY REQUIRED

When a mortgagor defaults on the mortgage the mortgagee will typically send a demand letter before seeking legal redress. If the mortgagor does not comply with the demand letter's terms, the mortgagee will commence self-help legal proceedings either by issuing a notice of sale by power of sale pursuant to the statutory provisions under the Property Act, R.S.N.B. 1973, c.P-19, &sect;&nbsp;44(1) (“Property Act”), or by following the provisions under the mortgage instrument for the exercise of power of sale. The mortgagor will be served in person with a Notice of Sale Under Mortgage (“Notice”) that informs the mortgagor that the power of sale process has commenced. The Notice must be served at least 4 weeks in advance of the sale date. It must also inform the mortgagor when and where the sale is scheduled to take place. The sale is usually done by public auction but a private sale is permissible. Once served with Notice, the mortgagor is permitted to pay off the entire balance of principal and interest owing (without further payment of bonus or penalty) up until the time of the scheduled mortgage sale. The mortgagee's lawyer must advertise the sale of the property at least once a week for 4 consecutive weeks in a local newspaper in the area where the property is located. The first of 2 advertisements are to be published in a local newspaper and must appear at least 4 weeks before the scheduled sale date in accordance with the provisions of the Property Act &sect;&nbsp;45(1). Notice must also be given, usually be registered first class mail, to all subsequent mortgagees, owners and encumbrancers more particularly shown and appearing on the title registry records. Once the property is sold and the amount due is paid to the mortgagee the mortgagee's lawyer usually notifies other interested parties with respect to the outcome of the power of sale and, if there are any surplus funds to be distributed, pays them in accordance with the provisions of the Property Act &sect;&nbsp;47(3). If a dispute arises, the mortgagee may pay the surplus into court and obtain an order discharging the mortgagee from any further involvement in the proceedings.

BRIEF DESCRIPTION OF PROCEDURE

The process will usually take anywhere from 6 to 10 weeks, depending upon the complexity of the case, number of parties to be served, etc.

TYPICAL LENGTH OF PROCEDURE

Attendance at the auction by the bidder or an agent of the bidder is required. The successful bidder will usually have to pay 10% of the sale price at the end of the auction and then has 15 to 20 days to pay the balance. If the balance is not paid the 10% deposit is lost and applied to the amount owning to the mortgagee. The deposit and the closing conditions and terms are set by the mortgagee and its legal counsel. The closing conditions and terms can be modified to suit the situation at hand.

POWER OF SALE BID REQUIREMENTS

If the sale is being conducted as a public auction, the mortgagor can redeem the property at any time up to the time of the final bid being accepted by the auctioneer. To redeem prior to the sale, the mortgagor must pay the principal, interest, and costs. Under common law they cannot be required to pay default interest or bonus penalties.

REDEMPTION PERIOD AND PRICE

No waiver of redemption permitted in original mortgage security documents, but parties are thereafter free to waive their respective rights so long as the party providing the waiver has independent legal advice at the time of such waiver.

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

If the proceeds of sale are insufficient to compensate the mortgagee a deficiency action may be commenced in a court. If successful, the mortgagor will be ordered to pay the mortgagee's damages, which normally are calculated as the amount owing on the mortgage plus interests, costs of conducting the sale, out-of-pocket expenses, auctioneer's fees, and property taxes (less all amounts received directly or indirectly from the property and its sale).

DEFICIENCIES

A residential tenant after a sale must be given notice in accordance with the Residential Tenancies Act, S.N.B. 1975, C. R-10.2, which requires up to &nbsp;3 months notice prior to the expiry of the lease depending upon the type of lease arrangement in accordance with &sect;&nbsp;24(1). Unless an alternative agreement is reached with the new owner, commercial tenants whose leases are registered after the subject mortgage's registration must vacate the day of the scheduled closing pursuant to the bidding papers used in the exercise of the power of sale. Commercial leases registered before the mortgage must be recognized and honored by the new owner. This is subject to any terms of a subordination and non-disturbance agreement(s) the mortgagee exercising the power of sale and the commercial tenant may have previously entered into.

EFFECT OF POWER OF SALE UPON LEASES

The Criminal Code, R.S.C. 1985, c. C-46 &sect;&nbsp;347, makes it an offence to charge an annual rate of interest that exceeds 60% on the credit advanced under an agreement. The Interest Act, R.S.C. 1985 c I-15 &sect;&nbsp;6, requires that the mortgage instrument state the amount of the principal money and the rate of interest chargeable on that money calculated yearly or half-yearly, not in advance.

USURY CEILING

USURY EXEMPTIONS

Federal legislation provides for statutory prepayment rights to individual mortgagors. A mortgagor can prepay a closed mortgage loan with a term exceeding 5 years at any time after the first 5 years of the term upon payment of a penalty equal to 3 months' interest. This is in lieu of providing notice. Interest Act, R.S.C.&nbsp;1985, c. I-15 &sect;&nbsp;10(1). Corporations, joint-stock companies, partnerships, trusts settled for business or commercial purposes, and unlimited liability corporations are excluded from the statutory prepayment penalty. Interest Act, s. 10(2)(b), SOR/2011-230.

PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS

A guarantor is known in equity as a surety. A surety has rights that can be exercised against the creditor of the principal debtor whose debt the surety has guaranteed. One of those rights is the right of subrogation, which is the right, upon payment of the debt by the surety, to stand in the place of the creditor and have the benefit of all its rights. Standard Brands Ltd. et al v. Fox et al., 29&nbsp;D.L.R.&nbsp;(3d) 167 (N.S.A.D. 1972). Upon payment by the guarantor of the mortgage debt, the guarantor is entitled to the benefit of all the rights of the mortgagee, including the right to the mortgage. The guarantor is entitled to an immediate assignment of the mortgage and the right to foreclosure in its own name. [Provisions of the Property Act and the Judicature Act R.S.N.B. 1973, c.J-2.]

GUARANTY, ASSUMPTION PAYMENT, OR OTHER AGREEMENT

FOR FILING: Filings pursuant to the Personal Property Security Act, S.N.B. 1993, c.P-7.1. (“PPSA”) are to be made in the Personal Property Registry of New Brunswick, an electronic central registry that serves the entire Province of New Brunswick. This registry allows both individuals and organizations to record security interests in personal property. Personal property includes goods, a document of title, chattel paper, investment property, an instrument, money, or an intangible. PPSA &sect;&nbsp;1(1). A lien charge or other interest that is given by rule of law cannot be filed in the Personal Property Registry unless a statute specifically allows for it. PPSA &sect;&nbsp;4(a).

LOCATIONS

A security interest in a fixture and a security interest in a crop may be registered in a land title registry by submitting a notice in accordance with the regulations of that registry. PPSA &sect;&nbsp;49(2). Once registered, every person dealing with the land is deemed to have knowledge of the security interest. PPSA &sect;&nbsp;49(4). The security interest in goods that attaches before or when the goods become fixtures has priority with respect to the goods over a claim to the goods made by someone with an interest in the land. PPSA &sect;&nbsp;36(2). However, this security interest is subordinate to the interest of a person with a registered mortgage of the land that, after the goods become fixtures, makes an advance under the mortgage or obtains an order for foreclosure or sale before the security interest is registered. PPSA &sect;&sect;&nbsp;36(4)(a)&(b).

SECURITY INSTRUMENTS AS FIXTURE FILING

Any person or entity entitled to or claiming under a mortgage of land may bring an action for recovery of the land within 15 years from the last payment of any part of the principal money or interest secured by the mortgage. Limitations of Actions Act (“LAA”), S.N.B. 2009, c.L-8.5, &sect;&nbsp;12 & 20. After 15 years has elapsed no action to recover the land can be brought. The timing of the 15-year period is based on the date the security is taken. LAA &sect;&nbsp;12(2). The same 15-year period applies to the enforcement of claims under the PPSA. As well, the 15-year limitation period also applies to the recovery of leased property, commencing from the last time at which any such rent was received.

STATUTE OF LIMITATIONS PERIOD

A lien is discharged when the claimant completes a prescribed form in writing containing the acknowledgment of payment and the release and discharge of lien, verified by affidavit and registered. LTA &sect;&nbsp;15(3). The same fee that is applicable to the claim also applies to the discharge of the lien. However, a Certificate of Pending Litigation, issued by the Clerk of the Court upon a claimant's lawyer initiating a formal legal action to enforce the lien, may be discharged and released only upon the registration of: (i)&nbsp;a court order; or (ii)&nbsp;a certificate of the court clerk, certifying such release and discharge in accordance with LTA &sect;&nbsp;38.

REQUIREMENTS FOR RELEASE OF LIEN

Not applicable in the Province of New Brunswick.

HOMESTEAD ISSUES

Regardless of which spouse owns the property, both spouses are equally entitled to possession of the matrimonial home, Marital Property Act (“MPA”), S.N.B.2012, c.107 &sect;&nbsp;18(1). Both spouses' consent is required to dispose of any interest in the marital home. MPA &sect;&nbsp;19(1). The right to redeem and the notice of proceeding to realize security of a matrimonial home is also held by both spouses. When the marriage is no longer in existence a spouse can apply for the division of marital assets. It is assumed that this division will be equal, unless it is proved otherwise in accordance with MPA &sect; 3(1). Spouses can agree on how to divide the property and debt via a prenuptial agreement, a marriage contract, or a separation agreement. If an agreement cannot be reached the MPA governs and a judge will make the determination of what is equitable. Usually, unless special circumstances can be proven, business assets are not considered marital property unless they are in the name of both spouses MPA &sect;&nbsp;1. A spouse may be entitled to business assets if the spouse contributed to the building or maintenance of the business. This is usually evidenced by assisting in the business while earning a nominal or no salary.

COMMUNITY PROPERTY

MORTGAGE TAX

The current fee for registering or recording a document is $85 per parcel PID number as prescribed in Schedule B Regulation 83-130 of the LTA.

REGISTRATION FEES

A real estate conveyance tax is applicable at the time of registration with respect to every deed conveying real property situated in the Province of New Brunswick. Real Property Transfer Tax Act (S.N.B. 1983, c.R-2.1). The current tax is 0.1% and it is imposed on the actual consideration paid for the property or the value of the real property conveyed or transferred by deed, whichever amount is the highest in accordance with RPTTA &sect;&nbsp;2(1.03). A lease for a term of 25 years or longer is also subject to deed transfer tax as well RPTTA &sect;&nbsp;6. The tax is payable at the time of the registration of the title transfer. Immediately after the grantee, or a solicitor or agent acting on their behalf, must file with Service New Brunswick an on-line prescribed form setting forth the actual value of the property, the names of the parties, and the location of the property. Before this transfer can be recorded satisfactory arrangements for an electronic funds transfer must be made with Service New Brunswick unless you can provide satisfactory proof that no tax was applicable. As a general rule no tax is payable in respect to deeds that confirm, correct, modify, or supplement a deed previously given, as there is no consideration paid or payable. As well, no tax is owed when real property is transferred by a mortgagee (or by a secured party) to itself upon acquiring title after carrying out a power of sale, from a wholly owned company to a wholly owned subsidiary company. Finally, no tax is payable on transfer of property between spouses.

REAL PROPERTY TRANSFER TAX

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

Private appointment of a receiver is readily available if such enforcement remedy is specifically provided for in the mortgage security agreement. On an application to the Court, a Court-appointed receiver is available pursuant to the provisions of the Judicature Act R.S.N.B. 1973, c.J-2., s. 33 where the Court makes a judicial determination that it is a “just and convenient” remedy in the circumstances.

RECEIVER AVAILABLE

Not applicable in commercial loan transactions.

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

&sect;&nbsp;5(1) of the New Brunswick Clean Environment Act (R.S.N.B. 1973, c. C-6.) (“CEA”) authorizes and directs the Minister of Environment and Climate Change to issue an order requiring the person to whom it is directed to do, in accordance with the directions set out in the order, all that is required to deal effectively with the discharge and/or spill of contaminants. Lender liability can be an issue depending upon the particular collateral making up the lender's security.

ENVIRONMENTAL LIEN LAW

<ol start="24">
 <li> INCEPTION OF L&M LIEN (Priority of Lien of Deed of Trust or Mortgage): For labor and materials, a Mechanic's Lien can be claimed to any person who performs any work or service upon or in respect of, or places or furnishes any material to be used in making, constructing, fitting, altering, improving, or repairing of any erection, building, land, bridge, mine, excavation. The lien is for the price of such services and/or materials rendered. The lien attaches on the interest of the owner in property. Mechanics' Lien Act R.S.N.B. 1973, c.M-6, &sect;&nbsp;4(1) “MLA”. The lien is limited and cannot exceed the amount owed to the contractor. MLA &sect;&nbsp;4(3). The lien arises automatically upon the completion of the work, materials, or services. However, the contractor must take certain steps to preserve the lien lest it be extinguished. A claim for a lien for wages and services must be filed within 30 days from the doing of such work or from the completion of such services MLA &sect;&nbsp;24. A claim for a lien for the supply of work and material or materials must be filed within 60 days of the last work and supply of materials or supply of materials. MLA &sect;&nbsp;24. The contractor must then commence an action and register a certificate of pending litigation within 90 days of the filing of the claim for lien. MLA &sect;&nbsp;27. A claim for a lien must be accompanied by an affidavit sworn by an individual with personal knowledge. An owner who has had work performed or materials delivered must withhold 15% of the payment price on each payment, whether progressive or lump sum. MLA &sect;&nbsp;15(3). This withholding must be maintained for 60 days after the contract has been substantially performed MLA &sect;&nbsp;15(4).</li>
 <li> PRIORITY OF REMOVABLE FIXTURES (Priority of Lien of Deed of Trust or Mortgage): A mechanics' lien has priority over all judgments, executions, assignments, garnishments, and receiving orders recovered, issued, or made after the lien arises. MLA &sect;&nbsp;9(1). Where a mortgage or other charge is registered before the filing of a claim of lien, a payment has priority over the lien, but only to the extent that the total of all payments or advances made by the person, including that payment or advance, does not exceed the value of the land at the time that payment or advance is made. MLA &sect;&nbsp;9(2). As well, the lien has priority over all payments or advances made on account of any conveyance or mortgage after notice in writing of the lien to the person making such payments, or after registration of a claim for such lien. MLA &sect;&nbsp;9(3).</li>
 <li> NEW CONSTRUCTION REMEDIES ACT S.N.B. 2020: In December 2020 the Province of New Brunswick enacted the Construction Remedies Act to replace the MLA upon proclamation into force. As of May 31, 2021 the Construction Remedies Act has not be proclaimed and is not in force. When proclaimed liens and priorities will arise similar to those in the MLA.</li>
</ol>

LABOR AND MATERIAL LIEN CLAIMS (“L&M LIEN”) - PRIORITY ISSUES

Is popular with commercial lenders in the Province of New Brunswick.

TITLE INSURANCE (COMMERCIAL LOAN POLICY)

Typical standard commercial loan policies are designed for use specifically in Atlantic Canada by most title insurers.

FORMS AVAILABLE TO LENDER

It is possible to request that the title insurer provide special loan coverage via endorsements to the commercial loan policy where the subject matter of the security is unique or otherwise raises legal and/or commercial issues not adequately covered off by the conventional standard commercial loan title insurance policy. &nbsp;

New Brunswick

Mortgage Law Summary

Continue reading the
Mortgage Law Summary for New Brunswick

New Brunswick

Mortgage Law Summary

Continue reading theMortgage Law Summary for New Brunswick

Continue reading the
Mortgage Law Summary for New Brunswick