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In This Volume

  • 20 (1) In this section and sections 21 to 24, “agreement for sale” means an agreement for sale as defined in section 16(1) of the Law and Equity Act.
  • (2) In sections 23 and 24, “residential mortgage” or “residential agreement for sale” means a mortgage or agreement for sale, registered against the residence where the borrower resides, that was granted, entered into or assumed for the purpose of permitting the borrower
  • (a) to acquire the residence,
  • (b) to make improvements to the residence,
  • (c) to make expenditures for family or household purposes, or
  • (d) to refinance for any of the purposes referred to in paragraphs (a) to (c).
  • (3) In subsection (2), reference to the borrower is a reference to
  • (a) the mortgagor or purchaser under the agreement for sale, or
  • (b) if the mortgage has been assumed or the purchaser’s interest in the agreement for sale has been transferred, the person who assumed the mortgage or the person to whom the purchaser’s interest was transferred.
  • (4) A reference in sections 23 and 24 to the “personal covenant” or “covenants” is deemed to be a reference to all covenants, terms and conditions in the mortgage or agreement for sale, and where those sections provide that liability in respect of the personal covenant or covenants ceases, liability ceases with respect to all those covenants, terms and conditions in the mortgage or agreement for sale.

1979-34-19.1; 1988-42-5, proclaimed effective December 1, 1988 (B.C. Reg. 411/88).

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

The following material is adapted from a discussion of the 1988 amendments to the Property Law Act by Martha J. Konig in “Property Law Act, Sections 19.1 through 20.3: Liability of Original Covenantors and Other Current Owners” in Foreclosures and Fraudulent Transactions (CLEBC, 1990), at p. 2.1.01. For convenience, the section references have been updated to reflect the section numbers used in R.S.B.C. 1996.

Section 20 sets out the definitions relevant to ss. 21 to 24. The most critical is that of “residential mortgage”. The protection afforded by most of the subsequent sections does not assist persons investing in real estate.

While the use of the borrowed funds is not something of which counsel typically have knowledge, it is now critical to determine whether or not borrowings have been used for business or other purposes. Has a family home been used simply as collateral for a business loan? Instruction sheets from lending institutions might be revised to address this question.

It is also important to note that the character of a mortgage can change on transfer. The definition looks not only at the purpose for which a mortgage is first granted but also at the purpose for which it is assumed. In other words, a non-residential mortgage over an investment property changes to a residential mortgage if a mortgagor assumes it for one of the purposes specified in s. 20(2). Would, however, that change of character operate to release an investor, under s. 23 or 24, who sells to a person who intends to reside in the premises and who assumes the mortgage as part of the purchase price? Such an interpretation of the legislation would be unlikely for it would similarly mean that a non-investor who sells to an investor might be denied the protection of ss. 23 and 24. These sections assess the mortgage at the time of transfer, not after the transfer. However, if a property is transferred two times within the term of a mortgage, and one owner meets the definition of “residential mortgage”, then it might be that, upon application under ss. 23 and 24, one owner is released but not the other.