Admin and legal fees were for reimbursing mortgagee’s expenses arising from default

Real property - Mortgages - Interest

Principal and interest were due and owing since mortgage matured on November 1, 2018, and mortgagors were in default. Mortgagee sought principal and interest, as well as additional amounts specified in mortgage, and possession of property. Mortgagors conceded that principal and interest were owing, but took issue with demand for payment of additional three months of interest, administrative fees and legal fees. Mortgagee brought motion for summary judgment. Motion granted in part; principal, interest and fees were to be paid within 30 days, failing which there would be order for possession; additional three months interest was not payable. Section 17 of Mortgages Act had no impact; mortgage contained specific provision on default that mortgagee had right to seek additional three months' interest on default as “liquidated damages” arising from default. Mortgagee was not entitled to additional three months' interest, as it was prohibited under s. 8 of Interest Act. Mortgagors were not seeking to retire mortgage early and paying for that privilege. Mortgagors were in default of paying principal back, and mortgagee was relying on provision that had effect of increasing charge on arrears beyond rate of interest payable on principal money not in arrears. Provision was void and unenforceable. As administrative and legal fees were intended to reimburse mortgagee for expenses incurred arising from default, those were permissible.

Benson Custodian Corporation v. Situ et al. (2019), 2019 CarswellOnt 8312, 2019 ONSC 3077, Schabas J. (Ont. S.C.J.).

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