Mortgages and Expropriations: A Refresher

  • January 17, 2020
  • Liviu Cananau and Katie Butler

The Recent Context

The impact of expropriations on land owners and tenants is top of mind as part of any public infrastructure project. Less attention, however, is given to the effects of expropriation on “security holders”.

The Expropriations Act[2] (the “Act”) defines “security holder” as a person who has an interest in land as security for the payment of money. This includes mortgagees/chargees, lien holders, execution creditors and holders of personal or other security interests registered on title to real property, all of whom hold specific and distinct rights under the expropriation regime in Ontario.

Expropriations affect mortgagees more frequently than any other type of security holder. As of 2016, there were close to 6,000,000 residential mortgages in Canada encumbering just shy of two-thirds of residential properties nationwide.[3] This does not include the commercial mortgage market, which, as of 2013, consisted of over $139.5 billion in mortgage-backed loans issued by a wide range of entities including chartered banks, credit unions, life insurance companies, pension funds, trusts and others.[4] 

Large, national mortgagees face significant complexity in managing expropriations as a result of the differences in expropriation legislation from province to province. This is compounded by changes in the real property and mortgage markets generally, resulting in higher loan values, increased leverage, and more risk.

Recent amendments to residential lending standards and regulation in Canada now render some property owners unable to qualify for new mortgages on similar terms, and have resulted in an increase in private or unregulated mortgage lending activity.

The expropriation of an increasingly wide variety of mortgage interests amidst changing market circumstances warrants the exercise of caution by expropriating authorities, land owners and mortgagees alike.