This is a part of our series of articles to help homeowners better understand the Power of Sale and Foreclosure processes in Ontario, Canada. This article will focus on Statements of Claim and when to file a Statement of Defence in relation to mortgage default in Ontario, Canada. The power of sale process can be very confusing and difficult to understand and there are many different steps and outcomes. We always recommend that you get assistance to determine your best way forward. Our office is here to help, and we provide free consultations. We are not lawyers, and the contents of this article are our opinion and not legal advice. You should always consult with a lawyer regarding your situation.
Receiving a Statement of Claim can be a very stressful experience. Every homeowner’s situation is unique; no one answer fits all power of sale situations. The first goal is to get a complete understanding of the legal and financial factors affecting your property.
The first thing to do is to read the Statement of Claim carefully. Make sure the address is correct and that the names of the owners are spelt correctly. Check the dates and the mortgage amounts owed to see if they are correct. If there are any errors, it may be possible to request a new claim be filed with the correct information. Remember, in most cases, these errors only mean that you are delaying the legal process; you are not stopping it.
A Statement of Claim should include the amounts owed to the lender at the time it was issued. It is important to note that the amount owed grows almost every day since there are additional interest charges and legal fees. Therefore, the older a Statement of Claim is, the less accurate it will be. To get an exact amount owed, the owner or their representative should request a mortgage information statement.
Ask your lawyer to do a name search for all persons on the title, which will show if there are any liens or charges against any owner. This search is different from a title search. It will show if a furnace lien or building lien was registered against the owner. Liens like this are now fairly common. A more severe lien could be from the Canada Revenue Agency. Liens such as an HST lien could have priority over your existing mortgages.
Every person is allowed to file a Statement of Defence in response to a Statement of Claim. A Statement of Defence is the defendant’s chance to explain why the plaintiff‘s claim is unjustified. Your defence should include relevant details and deny the allegations made against you.
The real question every person should ask is, should I file a defence, and how will it benefit me? There are specific timelines in which a Statement of Defence must be filed. According to the Government of Ontario, you must serve either your Statement of Defence or your Notice of Intent to Defend within 20 days if you were served with the claim in Ontario. 40 days if you were served with the claim elsewhere in Canada or the USA. 60 days if you were served with the claim outside of Canada or the USA
Many people believe they should file a Statement of Defence in response to a Statement of Claim, but they need to understand the full implications of filing a defence. First, do you have a valid defence? Can you explain why the mortgage is not in default? Next, what is the real cost of filing a defence? You can file your own defence, but the process can be complicated, and a judge will probably ask the homeowner to get legal representation.
Hiring a lawyer brings us to the next problem with filing a Statement of Defence: the cost. A Statement of Defence can cost thousands or tens of thousands of dollars. Can the homeowner afford this expense, and is the expense justified? We cannot speak to whether the owner can afford the cost of legal action, but in my experience, defences are NOT justified in most cases.
A Statement of Defence may buy the homeowner another month or two in their home, but there are additional legal fees, and the lender and its lawyers are required to do additional legal work. In most cases, if the defence is not valid, the legal costs incurred by the lender and its lawyer will be added to the mortgage.
In our opinion, there are only a few valid reasons for filing a Statement of Defence in a mortgage claim,
Determine all the debts on the property, including the first and second mortgages, liens, writs, etc. Homeowners can get a credit report, which could show some of the charges against the property.
To better understand how much is owed, ask your lawyer to do a title search. This search should include a name search for all persons on the title to see if there are any liens or charges against any owner. This search is different from a title search. It will show if a furnace lien or building lien has been registered against the owner; liens like this are now fairly common. A more severe lien could be from the Canada Revenue Agency, such as an HST lien, which could have priority over your existing mortgages.
Once the homeowner has a complete and up-to-date understanding of the amount owed on the property, some questions need to be answered. Is the amount owed less than the value of the property, or is the amount owed greater than the value of the property?
If the property’s value is greater than the amount owed, the additional legal charges will reduce the amount eventually paid to the homeowner. If the amount owed is less than the property’s value, the homeowner will still receive no money after the sale.
As a homeowner, saying that “I did not receive any of the legal documents” is usually not a good defence since most law firms can prove that the documents were delivered. But if you can prove that none of the owners were informed of the legal action, that may be a possible defence to slow down the legal action.
We have found that the best response to a Statement of Claim is to understand your and the lender’s rights, the amount owed, and the property value. Going to court can be a time-consuming, difficult, and expensive choice. Be practical: Does filing a Statement of Defence really result in a significant benefit to you? For support and more information, email ron@mortgagebrokerstore.com or call 416-499-2122.
