David Gruber spoke at the 2022 CBA Insolvency Law Conference in Toronto. He appeared on a panel that discussed what lenders and borrowers need to consider when dealing with real estate security, including how to value, protect and enforce.

Insolvency Insider covered the conference and posted the following summary of David's insights.

Jurisdictional Differences in Enforcement

David Gruber then covered certain differences in enforcement across Canada. David explained that these differences stem from the fact that, historically, a mortgage security took the form of an actual transfer of title, where the mortgagee became the legal and beneficial owner of the property, and the mortgagor just held an equity of redemption that was enforced in courts of chancery. In some provinces, the mortgage will include a power of sale in favour of the mortgagee, while in other provinces, this will not be enforceable as a clog on the equity of redemption.

In Ontario, while the power of sale is recognized, it is more common for mortgagees to seek a receivership order because they are worried about being found to have conducted an improvident sale. Depending on the rules of the province where the receivership is taking place, the process is different. In Ontario, the receiver is allowed to market the property for sale. In other provinces, the receiver is not able to sell or even market the property until the mortgagor’s equity of redemption has expired. As a result, in some cases, lenders will opt for a consensual CCAA or NOI over a receivership so that they are able to conduct a sale process right away without the debtor holding the process up.