A recent cost endorsement of Justice Bordin in the unreported decision of CIBC Mortgages Inc. v. York Condominium Corporation No. 54 provides mortgagees, condominium corporations and property managers with some needed direction on the issue of a mortgagee accessing a unit. The decision reinforced the standard practice of many condominium corporations à if a mortgagee is requesting the condominium corporation to provide access to a unit in the event of an alleged mortgagor/unit owner default, access should only be provided in one of the following circumstances:
- The unit owner provides the condominium corporation with unequivocal written consent authorizing the condominium corporation to provide the mortgagee (or its representatives) with unit access in furtherance of its power of sale;
- The mortgagee obtains a court order mandating the condominium corporation to provide it with access to the unit; or
- The mortgagee signs an agreement fully indemnifying the condominium corporation and its officers, directors, employees, agents etc. from any claims, complaints, issues etc. that may arise as a result of unit access being provided to the mortgagee. This agreement (an Indemnification Agreement) should be drafted by legal counsel.
Typically, the standard charge terms in a mortgage provide the mortgagee with a right to access the unit upon default. However, the mortgage is an agreement between the unit owner/mortgagor and the lender/mortgagee. The condominium corporation and property management are not parties to the mortgage/agreement. If a mortgagee is unable to gain access directly from the unit owner, many lenders will request the condominium corporation to provide access as opposed to the costly and protracted process of obtaining a court order. This puts the condominium corporation and property management in a difficult position: they appreciate that mortgagees need to obtain access in the event of a genuine default (after all, condominium corporations similarly enforce condominium liens like a mortgage), but they don’t want to get involved in a dispute that does not involve them. Further, there are concerns about being named in a claim if access is provided. Given this dilemma, many condominium corporations are counselled to provide access if the mortgagee signs an Indemnification Agreement. Many mortgagees agree to sign such an agreement, but there will always be some that refuse. In such circumstances, what should a condominium corporation do? Should access be refused? Should it insist on a court order?
In CIBC Mortgages Inc. v. York Condominium Corporation No. 54, CIBC requested YCC 54 to provide access to a unit. CIBC has commenced a power of sale due to a default and required access to sell the unit. YCC 54 responded that it could only provide access to the registered unit owner or the owner’s lawyer. CIBC repeated its request and YCC 54 advised that it could only provide access if CIBC signed an Indemnity Agreement and paid for YCC 54’s legal costs. CIBC refused to do so. CIBC brought a court application. Prior to the hearing, the parties agreed on the terms of a court order but both sides demanded their respective legal costs.
While the cost dispute was the matter before the court, Justice Bordin’s endorsement provides helpful direction on providing access and Indemnification Agreements. His Honour agreed with YCC 54’s position that it was not a party to the contract between the unit owner and CIBC and YCC 54 could not just provide access. Justice Bordin ordered that CIBC be provided access, but it was required to cover YCC 54’s legal costs on a partial indemnity basis.
While the particulars of each case may be unique and it is always best to seek legal advice, mortgagees should be prepared to either obtain a court order or sign an Indemnity Agreement. They cannot expect condominium corporations to simply provide access when there is an asserted default of the mortgagor/unit owner.
