Legal Blog

Mortgage Priority

Scott, Pichelli Easter Limited v. DuPont Developments Ltd. 2021 Ont SCJ (Div Ct), 2022 Ont CA

Under section 78(3) of the Construction Act, mortgages registered before the time when the first lien arose have priority over liens arising from the improvement to the extent of the lesser of (i) the actual value of the premises at the time when the first lien arose, and (ii) the money advanced under the mortgage. The mortgage arose as a vendor takeback mortgage on the sale of the land and, almost by definition, it would have been less than the value of the land at the time of the sale and therefore before any liens arose. It was common ground that the mortgage principal had priority to the liens. The Divisional Court held that the mortgage priority included not only the principal, but also the interest and other charges set out in the mortgage. The Court of Appeal dismissed the appeal.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.