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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

Prince Edward Island

Mortgages, debentures, and trust indentures are recognized security instruments, as are any other documents relating to or affecting any interest in or title to land in the nature of a mortgage. Registry Act, R.S.P.E.I. 1988, c. R-10 &sect;&nbsp;1(e) (the “Registry Act”). Furthermore, PART IV of the Real Property Act, R.S.P.E.I., c. R-3, &sect;&nbsp;55) (“Real Property Act”) provides for the use of Short Forms of Indentures, which among other instruments cover a short mortgage form for use in the Province of Prince Edward Island.

SECURITY INSTRUMENT USED

The Registry Act governs the recording of mortgages in Prince Edward Island. Pursuant to the Registry Act, documents evidencing real property ownership, such as deeds and mortgages, are registered and filed with the Registry of Deeds. The Registry Act provides that deeds and mortgages must be registered separately and in the prescribed form. Registry Act &sect;&nbsp;7(2). A mortgage is defined as including every mortgage, deed of further charge, debenture, assignment of mortgage, release of mortgage, certificate of discharge of mortgage, release of judgment lien, and writing relating to or affecting any interest in or title to land. Registry Act &sect;&nbsp;1(e).

RECORDING REQUIREMENTS

If a second mortgage is registered by a lender, a registered first mortgage that is made to secure past and future advances will continue to secure such advances up to the point when the first lender receives actual notice of the second mortgage. This priority can be lost, however, where the bank receives notice from a lien claimant. The requirement of actual notice is set out in Bank of Nova Scotia v. Farm Credit Canada, 2008 PESCTD 22.

SECURING FUTURE ADVANCES

So long as the security instrument contains satisfactory provisions to that effect, a lender may claim in a Power of Sale proceeding reimbursement of reasonable costs, charges, and expenses properly incurred with respect to the carrying out and enforcement of its mortgage security.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL

It is the practice of lawyers in Prince Edward Island to use the Power of Sale as the primary method of remedying default mortgages, although the Real Property Act &sect;&nbsp;72 also allows for a judicial sale as well. Most lenders prefer to place a Power of Sale clause in their mortgage instruments since they can recover their losses for a lower cost and more quickly than going through a Court of Law to repossess properties in default. Local law does not place any further restrictions on how the Power of Sale is used other than what is already enforced through the Real Property Act. There is no enforced time period that a property is in arrears before a lender can notify the parties of a Power of Sale, although it is the practice to wait until the mortgage is at least 90 days in default. The form of notice is not controlled by legislation, so lenders develop their own notices. The notice should advise of the property particulars as well as the time, place, and date of sale. Once served, the borrowers have a specific time period, generally 15 days but other time periods can be specified in the notice, to bring the mortgage back up to date and have it reinstated. Once that time period has passed the lender then attempts to sell the property through public auction. If the auction fails, then the property can be listed on the market with a real estate agent. During the time leading up to the auction, the lender must place notifications in the local newspapers that a public auction is going to happen. The lender may also, as a courtesy, individually notify all parties affected by the mortgage and sale of the property, though it is not obliged to do so. The lender should also obtain an appraisal, usually done in this time period as well. Notifications usually are ongoing for about 4 consecutive weeks before the auction. At the auction the Sheriff usually acts as auctioneer, but the lender can hire a private auctioneer if desired. The bidding is opened by reading the notice of sale as well as any conditions of sale that the lender may require. If not sold at auction, it is listed for sale or sold privately. The Real Property Act defines how the monies from the sale are used. They are first used to pay for the cost of the sale and any other costs incurred by the lender during the sale. Then they are applied to the mortgage balance.

BRIEF DESCRIPTION OF PROCEDURE

If a mortgage is made pursuant to the Short Form of Indentures, the mortgagor can exercise his or her right of redemption at any time before the completion of the sale. The mortgagor must pay the amount of any principal owing, as well as any interest in arrears and costs incurred by the mortgagee. Real Property Act &sect;&nbsp;14 sch. 2.

REDEMPTION PERIOD AND PRICE

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

The mortgagee may seek a deficiency judgment against the borrower by action in the Supreme Court.

DEFICIENCIES

Leases and mortgages are registered in the Registry of Deeds pursuant to the Registry Act &sect;&nbsp;7(2). The registry system gives priority to instruments as they are entered in the register. Actual notice of a prior unregistered instrument in favour of a third party does not affect the title acquired by a purchaser for value. Registry Act &sect;&nbsp;43. Where the lease has priority over the mortgage, the mortgagee takes subject to the lease and cannot obtain possession of the demised premises until the term of the lease has expired.

EFFECT OF FORECLOSURE ON LEASES

The Criminal Code makes it an offence to charge an annual interest rate that exceeds 60% on the credit advanced under an agreement. Criminal Code, R.S.C. 1985, c. C-46 &sect;&nbsp;347. The Consumer Protection Act requires lenders to disclose the cost of borrowing through an expression of the annual percentage rate or by disclosing the method of determining such a rate. The lender must also disclose the manner of calculating the cost of borrowing. This disclosure must be given at the time of borrowing. Lenders of loans that are subject to variations in the annual percentage rate, must also disclose that the rate is liable to change, as well as the basis on which the change will occur. Moreover, the lender is required to issue to the borrower an annual written statement showing the number and total amount of payments made during the year, the amount applied to the cost of borrowing, the amount of principal repaid, and the amount of principal outstanding. Consumer Protection Act, R.S.P.E.I. 1998, c. C-19 &sect;&sect;&nbsp;16(2)(a), 16(2)(c), 16(3). The Unconscionable Transactions Relief Act &sect;&sect; 2, 3 allows the court to interfere to assist the debtor if it finds that, having regard to the risk and all the circumstances, the cost of the loan is excessive and the transaction is harsh and unconscionable. This power to assist the debtor may be exercised in an action by the creditor or, the debtor, or any other action in which the amount due or to become due in respect of money lent is in question.

USURY CEILING

USURY EXEMPTIONS

Filings can be made with the Personal Property Registry (P.P.R.), a centralized electronic registry that serves the entire province of Prince Edward Island. Secured parties can use the P.P.R. to register security interests in personal property. Personal property is defined by the Personal Property Security Act as, goods, a document of title, chattel paper, a security, an instrument, money or an, intangible. Personal Property Security Act, R.S.P.E.I. 1988, c. P-3.1 &sect;&nbsp;1(dd). Secured parties must register an electronic financing statement in the prescribed form. Personal Property Security Act Regulations, P.E.I. Reg. EC270/98 &sect;&nbsp;15(1). The fee to register a financing statement is $26; an additional $9 fee is incurred per year for the duration of the registration, or $500 for a registration with an infinite term. Upon completing the registration, the secured party is issued a verification statement confirming the details of the security interest. P.P.S.A. Reg. &sect;&nbsp;8(1). The secured party must provide the debtor with a copy of the verification statement within 30 days of the date of registration, unless the debtor has waived in writing the right to receive the verification statement. P.P.S.A. &sect;&nbsp;43(11). Existing registrations can be amended electronically with the P.P.R., for a fee of $10. P.P.S.A. Reg. &sect;&nbsp;52(1). Pursuant to the amendment of a registration, a notice of change report is generated and distributed electronically or by mail to the secured parties listed in the registration. Unless otherwise provided for by statute, security interests in the form of a lien, charge or other interest given by rule of law or statute cannot be filed with the P.P.R. P.P.S.A. &sect;&nbsp;4(a).

LOCATIONS FOR FILING

Fixture is not exhaustively defined, except to say that a fixture does not include building materials. Fixtures are however, included in the definition of goods. Crops are defined to include crops, whether or not those crops are matured, and whether naturally grown or planted, attached to land by roots or forming part of trees or plants attached to land, as well as trees that are being grown as nursery stock or for uses other than the production of lumber and other wood products, and trees intended to be replanted in another location for the purposes of reforestation. P.P.S.A. &sect;&sect;&nbsp;1(s); 1(u); 1(l). A secured party may register a notice of a security interest in a fixture or crop with the Registry of Deeds, which must be in the prescribed form; this registration incurs a fee of $77.25. P.P.S.A. &sect;&nbsp;49(2); P.P.S.A. Reg. &sect;&nbsp;61(1); Registry Act &sect; 50.1(3). If the filing does not take place within 15 days after the fixture or crops attaches to the land, the secured party's interest may be subordinate to the interest of the land owner and any mortgagee of the land. The secured party must provide the debtor with a copy of the notice within 30 days after it is registered, unless the debtor has provided a written waiver of his or her right to the notice. P.P.S.A. &sect;&sect;&nbsp;49(5), 36(10), 37(8). Generally, a secured party with an 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 a person with an interest in the land. However, this priority becomes subordinate to a person who acquires an interest in the land after the goods become fixtures if the interest is acquired without fraud and before notice of the security interest is registered. The interest of a secured party with an interest in goods that attaches before or when the goods become fixtures is also subordinate to the interest of a person with a registered mortgage of the land if, after the goods become fixtures, the mortgagee makes an advance under the mortgage (only with respect to that advance), obtains an order for sale, foreclosure or foreclosure and sale, without fraud and before notice of the security interest in the fixture is registered. The interest of a secured party that attaches before, at the same time as, or after the goods become fixtures is subordinate to the interest of a creditor of the debtor who has registered a notice under the Judgment and Execution Act prior to the perfection or registration of the secured party's interest. P.P.S.A. &sect;&sect;&nbsp;36(2), 36(3), 36(4), 36(9). Generally, a secured party with an interest in crops has priority over a person with an interest in the land. However, the secured party's interest is subordinate to a person who acquires for value an interest in the land while the crops are growing crops, if the interest is acquired before notice of the security interest is registered. The secured party's interest is also subordinate to the interest of a person with a registered mortgage of the land if after the crops become growing crops, the person makes an advance under the mortgage (only with respect to that advance), or obtains an order for sale, foreclosure or foreclosure and sale, without fraud and before notice of the security interest in the crops is registered. A creditor who registers a notice of judgment under the Judgment and Execution Act has priority over a secured party with an interest in crops, so long as the notice is registered before the security interest is registered or perfected. P.P.S.A. &sect;&sect;&nbsp;37(2), 37(3), 37(4), 37(7).

SECURITY INSTRUMENT AS FIXTURE FILING

Proceedings charged on land or payable out of land, including mortgages, judgments, and liens, must be brought within 20 years after the right to recover accrued. Statute of Limitations, R.S.P.E.I. 1988, c. S-7 &sect;&nbsp;11(1). Likewise, proceedings to recover land or any sum of money payable under an agreement for the sale of land must also be brought within 20 years. Limitations &sect;&sect;&nbsp;12, 16. In the event that a mortgagee has obtained the possession of real or personal property or is in receipt of the profits from such land, the mortgagor must bring an action to redeem the mortgage within 20 years from the time at which the mortgagee obtained possession or first received any such profits. Similarly, a mortgagee must begin proceedings for foreclosure or sale under any mortgage of real or personal property, or to recover the property mortgaged, within 20 years from the date the right to take the proceedings first accrued to the mortgagee. Where payments on the account are received, the mortgagee's right to take proceedings are deemed to have first accrued at the time the last payment was made. Limitations &sect;&sect;&nbsp;34(1), 35, 36.

STATUTE OF LIMITATIONS PERIOD

If an action is not commenced within 90 days of registration, the lien expires and ceases to exist and a judge, upon a unilateral application, may order the discharge of the registration. Mechanics' Lien Act, R.S.P.E.I. 1988, c. M-4 &sect;&sect;&nbsp;27, 28(5). After 30 days from the date of registration of a lien, a person so entitled may send the lienholder written notice that the lien shall cease to exist unless an action is commenced within 30 days from the notice's mailing date. Unless an action is commenced within this period, a judge may order the discharge of the lien upon the application of any interested person. M.L.A. &sect;&sect;&nbsp;28(1), 28(3). Where an action has been commenced, a certificate of the Prothonotary (an officer of the court) may be registered to discharge a lien. This certificate indicates that the action has been disposed of or discontinued. M.L.A. &sect;&nbsp;28(4). A lien may also be discharged upon the registration of a certificate of discharge signed by the lienholder or his or her agent and verified by affidavit. M.L.A. &sect;&nbsp;30(1). Additionally, a judge may order the discharge of a lien upon any proper ground. M.L.A. &sect;&nbsp;53. A release of mortgage lien must be registered. Registry &sect;&nbsp;47(2).

REQUIREMENTS FOR RELEASE OF MECHANICS' LIEN

Neither a person who is non-resident of the Province of Prince Edward Island nor a corporation shall have an aggregate land holding in excess of 5 acres or having shore frontage in excess of 165 feet without obtaining the Executive Council's prior written permission. Prince Edward Island Lands Protection Act, R.S.P.E.I. 2002, c. L-5 &sect; 4.

LAND HOLDING RESTRICTIONS

The family home is defined as every property in which a married person has an interest and every property that is, or was at the time of separation, ordinarily occupied by the person and his or her spouse as their family residence. Family Law Act, R.S.P.E.I.&nbsp;1988, c F-2.1 &sect;&nbsp;19(1). Regardless of which spouse owns the property, both spouses have an equal right to possession of a family home. F.L.A. &sect;&nbsp;20(1). If the property is not used for a residential purpose, the family home will only consist of that part of the property that may reasonably be regarded as necessary to the use and enjoyment of the residence. F.L.A. &sect;&nbsp;19(3). 1 or both spouses may designate a property as a family home and, when both spouses register such a designation, any other property that is a family home but is not designated by both spouses as such ceases to be a family home until the designation is cancelled. F.L.A.&nbsp;&sect;&nbsp;21(4). Except in limited circumstances, such as the enforcement of an authorized court order, consent is needed by both spouses to dispose of or encumber an interest in a family home. F.L.A. &sect;&nbsp;22(1). A spouse or other person having an interest in the property may apply to the court to determine whether the property is a family home. The court may authorize the disposition or encumbrance of a family home if a spouse whose consent is required cannot be found or, is unavailable, is not capable of giving or withholding consent, or is unreasonably withholding consent. F.L.A. &sect; 24.

FAMILY PROPERTY

A $77.25 fee is incurred in registering a deed of conveyance where the value of the real property is less than $10,000. This fee increases with the value of the real property, the high end of the fee scale being $463.65, a fee incurred when the value of the property is $200,000 or greater. The fee scale for the registration of a deed of mortgage is based on the value of the principal sum of the mortgage and, as with deeds of conveyance, begins at $77.25 where the principal sum is less than $10,000, and increases to $463.65 where the principal sum is $200,000 or greater. The fee for registering every collateral mortgage is $103. Registry Act, R.S.P.E.I. 1988, c. R-10 &sect;&nbsp;50.1(3).

DOCUMENTARY STAMP TAX

Any person who registers a deed of conveyance must, before the deed is registered, pay a tax computed at the rate of 1% of the greater of the sale price or the assessed value of the real property. Real Property Transfer Tax Act, R.S.P.E.I. 1988, c. R-5.1 &sect;&nbsp;3(1). A number of exemptions apply; for instance, if a person who meets the definition of a first-time home buyer-files a declaration to that effect on the registration of the deed, and intends to occupy or use the property as a primary residence, then no tax is payable on the registration of the deed. Real Property &sect;&nbsp;5(2).

TRANSFER TAX

The Consumer Protection Act Cost of Credit Disclosure Regulations &sect; 5(d) contain a number of regulatory requirements that lenders must comply with. However, an exemption from these requirements exist where the principal amount of the loan exceeds $150,000 and the loan is secured by a mortgage on real property. The Unconscionable Transactions Relief Act allows a court that finds that the cost a loan is excessive and the transaction is harsh and unconscionable, to interfere in the debtor's favour. Such powers may be exercised in an action by the creditor, the debtor, or any other action in which the amount due under the terms of the loan is in question. Unconscionable Transactions Relief Act &sect;&sect; 2, 3.

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

Prince Edward Island does not have any formal licensing nor any education requirements for mortgage brokers.

LENDER QUALIFICATION AND/OR LICENSURE

<ol start="8">
 <li> INCEPTION OF L&M LIEN (Priority of Lien of Deed of Trust or Mortgage): A person has an L&M lien when he or she does, or causes to be done, any work upon or in respect of an improvement, or furnishes material to be used in an improvement for an owner, contractor, or sub-contractor. This lien arises when the work is begun or upon the furnishing of the first material. M.L.A. &sect;&sect;&nbsp;2, 8. Material is deemed to be furnished when it has been delivered on the land or in the immediate vicinity of the land upon which it is to be used. M.L.A. &sect;&nbsp;3(4). A claim of lien must be registered with the proper registry office and verified by an affidavit prepared by the lienholder or his or her agent or assignee. M.L.A. &sect;&sect;&nbsp;19(1), 19(2), 19(3), 21(2). A lien has priority over all judgments, executions, attachments, garnishments, and receiving orders recovered, issued, or made after the lien arises. M.L.A. &sect;&nbsp;9(1). Upon registration, the lien has priority over all claims under conveyances, mortgages, and other charges, as well as agreements for sale of land, registered or unregistered, made by the owner after the lien arises. If a mortgage or conveyance is registered after a lien for material arises, but before the registration of the claim of lien, the mortgage or conveyance has priority over the lien to the extent of payments made by a person in good faith before learning of the lien. M.L.A. &sect;&nbsp;9(2), 9(3); P.P.S.A. &sect;&nbsp;32. Where land is encumbered by a mortgage or other charge registered before a lien arises, the mortgage or other charge has priority over the lien to the amount of the moneys owing at the time the lien arises, but only to the extent of the value of the land. Similarly, a mortgage or other charge has priority over a lien for material furnished to the extent of payments or advances made under the mortgage or charge after the lien arose, but before the person making payments or advances has received written notice of the lien. M.L.A. &sect;&nbsp;9(4).</li>
 <li> PRIORITY OF REMOVABLE FIXTURES (Priority of Lien of Deed of Trust or Mortgage): During the existence of an L&M lien, no part of any material affected shall be removed to the prejudice of the lien. M.L.A. &sect;&nbsp;13(1). If the material has been delivered either on the land or in the immediate vicinity of the land upon which it is to be used, it is deemed to be furnished and is subject to a lien in favor of the person furnishing it until it is placed in the improvement. While the lien exists, any furnished material is not subject to execution or other processes to enforce any debt other than that for the purchase money thereof. M.L.A. &sect;&sect;&nbsp;3(4), 13(2). Where material furnished to be used is incorporated in an improvement, a lien attaches. The lien attaches even if the material does not strictly meet the statutory definition of material deemed to be furnished. M.L.A. &sect;&nbsp;3(5). With some exceptions, a security interest that attaches before or at the time the goods become fixtures, as is the case with L&M liens, has priority over a claim to the goods made by a person with an interest in the land. A secured party who has the right to remove goods from the land must exercise that right in a manner that causes no unnecessary damage or injury to the land and to other property situated on it, and causes no greater inconvenience to the occupier than is necessarily incidental to the removal of the goods. The secured party must give at least 15 days' notice to the debtor by registered mail before removal of the goods. P.P.S.A. &sect;&sect;&nbsp;36(2), 36(11), 36(18).</li>
</ol>

LABOR AND MATERIAL LIEN CLAIMS - PRIORITY ISSUES

Starting to become more popular with commercial lenders in the Province of Prince Edward Island.

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 by the conventional standard commercial loan title insurance policy. &nbsp;

Prince Edward Island

Mortgage Law Summary

Continue reading the
Mortgage Law Summary for Prince Edward Island

Prince Edward Island

Mortgage Law Summary

Continue reading theMortgage Law Summary for Prince Edward Island

Continue reading the
Mortgage Law Summary for Prince Edward Island