1. Section 6 (“Section 6”) of The Mortgage Act (Manitoba) (the “MMA”) provides that where certain persons entitled to redeem a mortgage (hereinafter a or the “Redeemer”) are prepared/willing/want to pay the secured debt to the mortgagee, there is a choice available to a Redeemer, other than simply getting a discharge of the mortgage and confirmation of satisfaction/payment in full of the secured debt obligation. In particular:
a. A mortgagor can direct the mortgagee to assign the debt (and the mortgage) to a “third party”, provided that the mortgagee being paid out is provided with certain information. The information is to include a current status of title for the mortgaged realty plus a statement showing the debt secured by each subsequent registrant (ie, each person having a subordinately ranking interest in the mortgaged realty) plus a statutory declaration describing the status (unpaid, in whole or in part) of each subsequent registrant’s claim (hereinafter, the “Paid Out Mortgagee’s Requirements”).*
b. Each subsequent registrant is similarly entitled to pay the (prior) mortgagee’s secured debt claim and require that prior mortgagee to assign its debt claim and its mortgage to a third party.
However, such entitlement of a mortgagor or a subsequent registrant is available only in the following circumstances:
1. Where more than one of the mortgagor and the subsequent registrants wish to redeem a prior mortgagee’s debt and security, the highest ranking of them has a first priority entitlement to redeem (and get an assignment to it). The priority “hierarchy” here starts with the highest ranking subsequent registrant (below) the mortgagee being redeemed. It then drops down level by level to the following subsequent registrants, with the mortgagor’s entitlement to redeem being at the bottom of the hierarchy. The writer takes this to mean that where Whiteacre is owned by “O”, and the property has been mortgaged by “O” to “A” (first mortgagee), then to “B” (second mortgagee), and then to “C” (third mortgagee), and all of “O”, “B” and “C” wish to redeem “A”‘s mortgage and direct an assignment of “A”‘s debt claim and the mortgage itself, “B” has the first overriding entitlement to redeem, and if “B” passes on this right, “C” is next entitled to redeem, and, if both “B” and “C” choose not to redeem, only then is the owner/mortgagor “O” entitled to redeem. Although Section 6 doesn’t specifically say so, it is the writer’s understanding that if “C” wishes to redeem “A” in this situation, it would not be entitled to do so – at least without “B”‘s consent – and “A” would not be entitled to accept redemption from “C” and thus not be entitled to assign its debt and mortgage security to “C” without “B”‘s consent;
2. The subsequent registrant redeeming must ensure that “A” is provided with the Paid Out Mortgagee’s Requirements (aforementioned). This requirement is no doubt mandated to enable the first ranking mortgagee (being paid out) to be in a position to determine the aforementioned respective “redemption priority entitlements” of the other parties with lower ranking interests in the property, down to and including the mortgagor. There are “real life commercial situations” in which it makes sense for a completely new party (an outside financier) to want to purchase an existing mortgagee’s debt claim and the security therefor. Similarly, there are understandable commercial reasons for subordinately ranking registrants wanting to buy out a prior mortgagee’s – or prior mortgagees’ – mortgage(s) and the thereby secured debt claims. Consider the following:
a. A mortgagor can direct the mortgagee to assign the debt (and the mortgage) to a “third party”, provided that the mortgagee being paid out is provided with certain information. The information is to include a current status of title for the mortgaged realty plus a statement showing the debt secured by each subsequent registrant (ie, each person having a subordinately ranking interest in the mortgaged realty) plus a statutory declaration describing the status (unpaid, in whole or in part) of each subsequent registrant’s claim (hereinafter, the “Paid Out Mortgagee’s Requirements”).*
b. Each subsequent registrant is similarly entitled to pay the (prior) mortgagee’s secured debt claim and require that prior mortgagee to assign its debt claim and its mortgage to a third party.
For more information about this article please contact Scott Ransom.
