MORTGAGES - PROCEDURE by skm10786

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									SASKATCHEWAN
PRACTICE CHECKLISTS                                                                                         MORTGAGES – PROCEDURE



                                                 MORTGAGES – PROCEDURE



                                                              INTRODUCTION
This checklist deals with a conventional first mortgage of residential property. It is designed for use by
counsel for the mortgagee. It should be used with the Mortgages – Drafting checklist (RE-7).


                                                        LIST OF AUTHORITIES
Kleisinger, E., “Commercial Mortgages” (May 2001), Real Estate Seminar, Saskatchewan Legal
    Education Society Inc.


Acts
Bank Act

The Builders’ Lien Act

The Business Corporations Act

Interest Act

The Land Contracts (Actions) Act

The Land Titles Act, 2000

The Limitation of Civil Rights Act
The Personal Property Security Act, 1993

The Saskatchewan Farm Security Act


                                                                   CONTENTS

A.     Initial Contact.............................................................................................................................. RE-6-2
B.     After Initial Contact .................................................................................................................... RE-6-6
C.     Preparing Mortgage .................................................................................................................. RE-6-11
D.     Concluding Mortgage ............................................................................................................... RE-6-11
E.     Registration and Pay Out .......................................................................................................... RE-6-12
F.     Closing the File ......................................................................................................................... RE-6-13




9/2006                                                                                                                                          RE-6-1
                                                                                    SASKATCHEWAN
MORTGAGES – PROCEDURE                                                          PRACTICE CHECKLISTS
                                                                                      Notes:


                              CHECKLIST



A.       INITIAL CONTACT
1.       If first contact with client is by telephone, consider desirability
         of interview, bearing in mind client’s experience and knowledge.

2.       If first contact with client is by way of written instructions:

         2.1     Examine instructions carefully, considering such matters
                 as:

                 2.1.1    Whether instructions need clarification.

                 2.1.2    Whether    there       are    any     non-standard
                          requirements.

                 2.1.3    Whether mortgagee has requested a standard
                          form of opinion which includes opinions you are
                          unable to give. If so, contact mortgagee
                          immediately to settle opinion.

         2.2     Ensure that you have all necessary information (see
                 paras. A. 8 and A. 9).

         2.3     Consider whether it is desirable to meet with or
                 telephone client.

         2.4     Contact client to acknowledge receipt and discuss the
                 transaction.

3.       When arranging interview, ask client to bring all relevant
         information (e.g., purchase contract or commitment letter from
         bank).

4.       Ensure that there is no conflict of interest; ensure that you
         consider Chapters IV and V of Code of Professional Conduct
         and conduct rulings thereunder.

5.       Advise client regarding calculation of your account, method and
         timing of payment, and conditions upon which you undertake to
         act as solicitor. Be sure to include disbursements in calculation
         of your account. Include GST and PST. Also advise that if
         transaction becomes more complicated, then fees and
         disbursements may have to be increased. Explain conflict rules
         (see paragraph A. 4).

6.       Where desirable, bearing in mind client’s experience and
         knowledge, discuss background of transaction, purpose of
         financing and client’s objectives and expectations.


RE-6-2                                                                                         9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                          MORTGAGES – PROCEDURE
                                                                                       Notes:
7.       Review purchase contract and note what it says about financing,
         such as terms of mortgage and responsibilities of each party.

8.       Collect information including:

         8.1     Mortgagee:

                 8.1.1   Name.

                 8.1.2   Address.

                 8.1.3   Telephone.

                 8.1.4   Person authorized to give you instructions.

                 8.1.5   Is mortgagee an institutional, corporate, or
                         individual lender? Is mortgagee a foreign lender
                         (s. 508, Bank Act).

                 8.1.6   Obtain ISC client number and confirm address is
                         accurate.

         8.2     Mortgagor:

                 8.2.1   Name.

                 8.2.2   Address.

                 8.2.3   Telephone.

                 8.2.4   Occupation.

                 8.2.5   If mortgagor is also the purchaser, confirm ISC
                         number.

                 8.2.6   Whether there is joint tenancy or tenancy-in-
                         common.

                 8.2.7   Any problems regarding capacity (e.g., age,
                         mental competence, trustee, attorney).

                 8.2.8   Name of solicitor.

                 8.2.9   Residency. (foreign resident) is        clearance
                         certificate/withholding tax required?

                 8.2.10 Is mortgagor a corporation? Is it a Saskatchewan
                        corporation or is Saskatchewan extraprovincial
                        registration required? (See s. 262, The Business
                        Corporations Act).

                 8.2.11 Does mortgagee require photo-identification? If
                        so, advise mortgagor.


9/2006                                                                                          RE-6-3
                                                                                    SASKATCHEWAN
MORTGAGES – PROCEDURE                                                          PRACTICE CHECKLISTS
                                                                                      Notes:
         8.3    Guarantor or covenantor:

                8.3.1   Name.
                8.3.2   Address.

                8.3.3   Telephone.

                8.3.4   Occupation.
                8.3.5   Any problems regarding capacity (e.g., mental
                        competence, trustee, attorney).

                8.3.6   Name of solicitor.
                8.3.7   Form of independent legal advice required by
                        lender.

         8.4    Property:

                8.4.1   Civic address.

                8.4.2   Legal description.

                8.4.3   Age of premises; any construction.

                8.4.4   Existing tenancies.

                8.4.5   Insurance, including name of agent.

                8.4.6   Survey/zoning/building information abstract/
                        siting certificate/title insurance, if required. See
                        if vendor (if applicable) or lender has recent
                        survey before ordering.

                8.4.7   Environmental searches (if required).

                8.4.8   Whether conveyance is involved and, if so, basic
                        details, including closing date.
9.       Discuss in detail proposed mortgage, referring to Mortgages –
         Drafting checklist. Include:

         9.1    Type of loan (e.g., conventional, with holdback, building
                loan with progress advances, CMHC insured, other
                insured, demand loan, revolving or line of credit loan).

         9.2    Type of property (e.g., principal residence of borrower
                vs. revenue property). Consider advising client to take
                assignment of rents and/or assignment of leases from
                mortgagor.
         9.3    Completion date and mortgagee funding deadline.

         9.4    Payment date (are funds required at any particular time?)
                and conditions precedent to advancement of funds.

RE-6-4                                                                                         9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                            MORTGAGES – PROCEDURE
                                                                                         Notes:
         9.5     Principal (and any amounts to be deducted from
                 principal, such as taxes in arrears, legal fees and
                 disbursements, interest adjustment), interest, interest
                 rate, payment (whether principal or principal and
                 interest), term, special clauses (e.g., due on sale,
                 prepayment, due on leaving employment with
                 mortgagee),     environmental   representations    and
                 warranties indemnity.
         9.6     Copies of lender’s forms: standard mortgage terms,
                 additional or modified terms (e.g., prepayment terms,
                 assumptions),    receipt    of      mortgage    terms
                 acknowledgment.
10.      Discuss other relevant matters, including:
         10.1    Desirability of getting appraisal (usually determined by
                 mortgagee).
         10.2    Check zoning and bylaw compliance (generally a
                 requirement of mortgagee and is good idea anyway). A
                 surveyor’s certificate is usually required as prerequisite.
         10.3    Whether survey is needed. See if vendor has survey
                 already and if appropriate statutory declaration will be
                 satisfactory to lender.
         10.4    Insurance requirements (e.g., mortgagee as loss payee;
                 subject to standard mortgage clause approved by the
                 Insurance Bureau of Canada) and necessity of ensuring
                 that mortgagor has obtained satisfactory insurance prior
                 to advancing funds.
         Advise mortgagor to arrange for own liability and contents
                insurance.
         10.5    Any possible builders’ lien issues (although mortgagee
                 is not required to hold back funds, advances should not
                 be made until checking for builders’ liens).
         10.6    Tax matters. Property tax. GST, income tax, withholding
                 tax.
         10.7    Environmental concerns or problems which would erode
                 or eliminate mortgagee’s security.
         10.8    Whether there is any concern that security interest may
                 exist in any fixtures (including manufactured homes) or
                 crops on property and whether Personal Property
                 Registry search should be conducted.
11.      Be sensitive to any possibility of fraudulent preference. Consider
         Criminal Code usury provisions and disclosure statement
         requirements (Bank Act).

9/2006                                                                                            RE-6-5
                                                                                    SASKATCHEWAN
MORTGAGES – PROCEDURE                                                          PRACTICE CHECKLISTS
                                                                                      Notes:
12.      Clarify who is responsible for each item: mortgagor, mortgagee
         or you. Also, clarify which party is to pay in each case.
13.      If mortgagee is non-institutional lender, obtain retainer and
         instructions defining extent of your authority. In the case of a
         new corporate client, consider obtaining directors’ resolution
         confirming conditions of retainer and setting out who will give
         instructions and who you will report to. Look to see if lender has
         power to lend. Consider jurisdiction of lender.


B.       AFTER INITIAL CONTACT
1.       Send letter to client confirming instructions, setting out manner
         in which you will determine your fee for services, stating the
         conditions upon which you have agreed to act, and summarizing
         the points discussed. Consider reporting on results of search as
         set out below.

2.       Open file: place checklist in file and make tickler entries
         (ensuring that you note commitment expiry, completion and
         payment dates).

3.       Communicate with counsel representing other parties, advising
         that you are acting for your client. If other parties have not
         retained counsel, send letter advising that this be done.

4.       Search title:

         4.1     Confirm civic address and legal description.
         4.2     Confirm name(s) of registered owner(s) and manner in
                 which they hold title to land: joint tenancy or tenancy-in-
                 common.
         4.3     Order copy of title and parcel picture (if available);
                 compare legal description on title with tax search; and
                 obtain copies of current registered interests (other than
                 interests to be discharged). Search mineral and surface
                 parcels. Confirm whether mortgage is to charge mineral
                 parcel.

         4.4     Examine titles for ties and locks.

         4.5     Ensure that subject of mortgage is an identified parcel
                 without any ties or locks.

         4.6     Ensure parcel(s) comprise all of the property to be
                 mortgaged.

         4.7     Obtain copies of any other relevant documents,
                 including plan of property, if you are uncertain as to the
                 property to be charged.


RE-6-6                                                                                         9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                             MORTGAGES – PROCEDURE
                                                                                          Notes:
5.       Conduct Writ Registry search under name of mortgagor, and
         guarantor or co-covenantor (if required).
6.       If mortgage relates to title to condominium, conduct relevant
         searches and obtain necessary information (e.g., condominium
         plan, charges against common property, bylaws and
         amendments. Also, if purchaser is buying for investment
         purposes, check that bylaws do not prohibit or limit rentals).
         Obtain an Estoppel Certificate.
7.       Report results of search to client and discuss where desirable. In
         particular:
         7.1     Discuss effect of various interests, including priorities
                 and restrictions on use of land, and get instructions (e.g.,
                 to pay out certain interests). Confirm instructions and
                 advice in writing.
8.       Conduct corporate search on corporate parties: mortgagor,
         guarantor and, where necessary, mortgagee:
         8.1     Registered office and mailing address.
         8.2     Profile report.
         8.3     Directors and officers.
         8.4     Articles of Incorporation and Articles of Amendment, if
                 applicable.
         8.5     Good standing, including whether company has been
                 struck off and subsequently restored.
         8.6     Powers and manner in which they are to be exercised:
                 8.6.1   Mortgagor’s power to borrow; also whether
                         there is any floating charge restricting right to
                         grant fixed charge having priority.
                 8.6.2   Guarantor’s compliance requirements re
                         providing financial assistance (The Business
                         Corporation Act, s. 42).
                 8.6.3   Mortgagee’s power to lend: The Business
                         Corporations Act, s. 42; prohibitions on lending
                         to directors, shareholders, etc.; and aggregate
                         value of loans. Consider any unanimous
                         shareholders’ agreement restrictions.
                 8.6.4   Manner of execution of documents (signing,
                         authority, use of seal).
                 8.6.5   Foreign lenders: Part XII, Bank Act restrictions
                         on carrying on banking business in Canada. Is
                         extraprovincial registration required?

9/2006                                                                                             RE-6-7
                                                                                   SASKATCHEWAN
MORTGAGES – PROCEDURE                                                         PRACTICE CHECKLISTS
                                                                                     Notes:
9.       Consider The Personal Property Security Act, 1993 and, if
         appropriate, conduct search under vendor’s and/or borrower’s
         names, and if applicable, guarantor’s or covenantor’s names. If
         guarantee contains postponement and assignment of
         loans/claims, register financing statement, if required by
         mortgagee.

10.      Check commitment letter, including matters such as:

         10.1    Basic terms and parties.
         10.2    Conditions precedent to advance.

         10.3    Material change clause whereby it is condition of
                 disbursement     that    representations   given     by
                 mortgagor/guarantor and property securing loan have not
                 changed in material adverse way.

         10.4    Deposit required on acceptance of commitment letter.
                 Nature of deposit – earned on acceptance or refundable
                 on loan being advanced. Appraisal fees, commitment
                 fees, stand-by fees.

         10.5    Documentation required, and who is responsible for
                 preparing it; documentation to be satisfactory to
                 mortgagee’s solicitor and not matter for negotiation.

         10.6    Consider severance clause, particularly regarding illegal
                 interest rates.

         10.7    If building loan with progress advances consider
                 whether “lien holdbacks” are appropriate or whether
                 client should ensure borrower directly complies with The
                 Builders’ Lien Act.
         10.8    Priority requirements.

         10.9    Compliance with zoning and other local bylaws.

         10.10   Insurance requirements.
         10.11   Payment of real property taxes.

         10.12   Provision of financial statements.

         10.13   Costs (legal fees; (solicitor and client) applicable taxes
                 and disbursements).

         10.14   Restrictions on assignment.

         10.15   Commitment to survive execution, delivery, registration
                 of mortgage and all advances of funds under mortgage
                 (provided that it does not conflict with documents
                 flowing from it).


RE-6-8                                                                                        9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                             MORTGAGES – PROCEDURE
                                                                                          Notes:
         10.16   Other important terms and conditions (consider some of
                 the matters mentioned in Mortgages – Drafting
                 checklist).

                 10.16.1 Default.

                 10.16.2 Disbursements.
                 10.16.3 Mortgagor’s representations.

                 10.16.4 Bankruptcy clause.

                 10.16.5 Waiver.
         10.17   Prepayment privileges (if any).

         10.18   Is mortgage assumable?

11.      Search with municipality for property taxes, any improvement
         levies and deferred development levies, service levies, etc.
         (current and past year, any arrears and appeals), zoning, etc.

12.      Consider whether to make special inquiries respecting pending
         local improvement charges.

13.      Conduct other searches, request confirmations, etc. as required,
         on such matters as: builders’ liens, WCB liability, statutory
         declaration re wage claims, statutory declaration re solvency of
         mortgagor/guarantor, environmental assessment, chattel

         mortgages, outstanding work orders or requirements regarding
         improvements. (This depends upon nature of property, e.g.,
         restaurant, apartment building, livestock barn, etc.) Consider
         effect of unregistered Crown liens and advise client whether you
         intend to search or qualify your opinion. Obtain authorizations
         from mortgagor to carry out required searches.

14.      Obtain, review or prepare all required documents, such as:
         14.1    If so instructed, certificate of compliance with restrictive
                 covenants, statutory building schemes and land use
                 contracts.
         14.2    For corporate parties:

                 14.2.1 Certificate or opinion letters from mortgagor’s
                        and guarantor’s solicitors, to include matters
                        such as: corporate status, good standing,
                        incumbency, authorization and execution.
                        Consider settling these early, if possible, so there
                        are no surprises at closing.

                 14.2.2 Directors’      resolution     and    shareholders’
                        resolution, if required (certified copies).


9/2006                                                                                             RE-6-9
                                                                                SASKATCHEWAN
MORTGAGES – PROCEDURE                                                      PRACTICE CHECKLISTS
                                                                                  Notes:
              14.2.3 Disclosure of financial assistance by guarantor
                     pursuant to The Business Corporations Act,
                     s. 42.
              14.2.4 Certificate of status.
      14.3    Consents, postponements, or subordination agreements
              regarding any prior interests
      14.4    Insurance policy that meets requirements or certificate of
              insurance stating that coverage meets specified
              requirements.
      14.5    Certificate of independent legal advice (e.g., for spouses
              who are joint tenants where only one is receiving
              mortgage proceeds; all guarantors. Note The
              Saskatchewan Farm Security Act, s. 36 requirement).
      14.6    Any exemption order or statutory waivers required (e.g.,
              The Saskatchewan Farm Security Act, s. 44 re exemption
              for home quarter; The Limitation of Civil Rights Act and
              The Land Contracts (Actions) Act (for corporations).
      14.7    Appraisal.
      14.8    Survey.
      14.9    Any other forms required.
      14.10   Building Information Abstract, Zoning, Memorandum,
              Siting Certificate, Bylaw Compliance, etc.
15.   Contact other solicitors regarding registration and exchange of
      undertakings. Clarify financial details and division of
      responsibility for clearing title.
16.   Clear interests as instructed:
      16.1    Obtain payout information (in particular, whether
              balance outstanding may be prepaid and whether there is
              penalty) and confirm by letter. Consider need to obtain
              pre-executed, registrable discharges of interests from
              non-institutional lenders at the least, and institutional
              lenders if possible. Consider whether last payments have
              cleared – if not, hold back money as required.
      16.2    Request payout statements.
      16.3    Determine who will prepare discharge authorizations
              and coordinate the process.
17.   Determine whether there are any matters requiring adjustment.
      Prepare statement of loan proceeds and adjustments and send to
      client.
18.   Prepare authorization and order to pay mortgage proceeds.

RE-6-10                                                                                    9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                              MORTGAGES – PROCEDURE
                                                                                           Notes:
C.       PREPARING MORTGAGE

Note: Most institutional lenders provide their own form.

1.       Prepare outline of mortgage:

         1.1     Note clauses from your precedent file that will be
                 included (refer to Mortgages – Drafting checklist).

         1.2     If it is a CMHC mortgage, use CMHC form          if required,
                 and modify as may be necessary. This              is equally
                 applicable for other standard form               mortgages.
                 Remember that you must be satisfied with         efficacy of
                 form.

         1.3     Ensure that the mortgage has an appropriate charging
                 clause and other prerequisites of The Land Titles Act,
                 2000 are complied with.

         1.4     Insure compliance with Interest Act, s. 6 and s. 7.

2.       Prepare first draft.

3.       Review first draft, checking each segment to ensure that it
         achieves client’s objectives, and checking documents as a whole
         to ensure that it is internally consistent. Ensure that no provisions
         operate as a clog on equity of redemption. Make necessary
         corrections and prepare second draft.

4.       Go over second draft with client or send to client with request
         that client review it and note any changes or questions. Discuss
         with client and make any changes required.

5.       Assuming mortgagor has lawyer, send draft to borrower’s lawyer
         for review.

6.       Prepare written authority to pay, addressed to mortgagee and
         mortgagee’s lawyer, identifying payee of balance of proceeds
         and authorizing all disbursements of mortgage proceeds (e.g.,
         any existing mortgage payouts, CMHC or brokerage fees, fees
         payable to mortgagee and legal fees and disbursements).


D.       CONCLUDING MORTGAGE

1.       Update searches as required.

2.       Give signed disclosure statement to mortgagor (Bank Act, ss.
         450–452 and regulations).




9/2006                                                                                              RE-6-11
                                                                                    SASKATCHEWAN
MORTGAGES – PROCEDURE                                                          PRACTICE CHECKLISTS
                                                                                      Notes:
3.    Check that all documents received are dated and are in
      registrable form; that no changes have been made; that
      certifications include officer’s full name, address and
      professional capacity; and that designation of authorized
      signatory is entered and, if not witnessed by a Saskatchewan
      solicitor, that there is affidavit of execution. Consider whether to
      request opinion from borrower’s lawyer as to proof of identity of
      borrower.
4.    If affidavit of execution is taken before foreign notary, check
      that notary has affixed his or her seal to affidavit; if sworn in
      USA, ensure that expiry date of notary’s appointment is
      included. If seal is impressed, prepare appropriate certificate.
5.    Check for any undertakings imposed on you by mortgagor’s
      solicitor. If you are given mortgage documents on a form of
      undertaking which limits client’s discretion to refuse to advance
      after registration, get client’s authority to so limit such discretion
      or obtain release from undertaking (most mortgages give lender
      this discretion).


E.    REGISTRATION AND PAY OUT
1.    Register mortgage as an interest at ISC with an executed copy of
      the mortgage attached to your Interest Registration.
      1.1     Conduct pre-registration title search, and consider Writ
              Registry search as well.
      1.2     Prepare packet and register with any other discharges
              and any other interests required. Ensure that interests are
              registered in proper order.
      1.3     Conduct post-registration title search and obtain copies
              of title and copies of each attachment to each interest
              registration. Compare copy of attachment to original to
              verify accuracy of registration.
      1.4     Register financing statement at Personal Property
              Registry with respect to guarantors where there is
              assignment and postponement of claim.
2.    Pay funds to mortgagor or as per authorization (see C. 6):
      2.1     Conduct title search just prior to pay out.
      2.2     Ensure that all conditions precedent have been met prior
              to paying funds to mortgagor.
      2.3     Send reporting letter to client, with original executed
              documents and copies of registered documents and any
              other required material and obtain instructions to pay
              funds to mortgagor.
      2.4     Inform mortgagee of disbursement date.

RE-6-12                                                                                        9/2006
SASKATCHEWAN
PRACTICE CHECKLISTS                                                          MORTGAGES – PROCEDURE
                                                                                       Notes:
F.       CLOSING THE FILE
1.       Review state of title certificate.

2.       Send reporting letter and statement of account to client. Include
         copies of relevant documents and any information and opinions
         not included in previous reports. Advise regarding any matters to
         check before making further advances (e.g., builders’ liens, see
         paragraph A. 10.5). Ensure that interests are identified by
         Interest Register Numbers.

3.       Close file. In closing file consider storage and destruction
         requirements.




9/2006                                                                                          RE-6-13
                             SASKATCHEWAN
MORTGAGES – PROCEDURE   PRACTICE CHECKLISTS
                               Notes:
Notes:




RE-6-14                                 9/2006

								
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