Discharge/Release of Mortgages


The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses the discharge of a mortgage.

The situation

In typical residential mortgage arrangements, the purchaser’s lawyer must certify to the lender that the property is not subject to prior mortgages and is a valid first mortgage.

When there is an outstanding mortgage on the property, the purchaser’s lawyer will require an undertaking from the vendor’s lawyer to obtain a release of that mortgage.

Delays in executing the documents means the purchasing lawyer has signed a statement to the new lender which may not be accurate. The vendor’s lawyer has signed an undertaking that has not been fulfilled.

Sample lender instructions

The undersigned hereby certifies as follows:

A valid and legally binding 1st mortgage has been registered over the lands described in the Mortgage. The priority of the Mortgage is as shown in your Requisition Form. Your Mortgage is not subject to other prior encumbrances other than minor defects which do not negatively affect the marketability of title.

Practice guidance

Vendor’s lawyer

  • When signing an undertaking to the purchaser’s lawyer, the vendor’s lawyer must:
    • have in hand a current payout from the lending institution showing the payout, any prepayment penalties, and a daily rate for the mortgage
    • make the mortgage payout to the lending institution after having properly accounted for and included the necessary per diem interest
    • ensure there are no time limitations. Some lenders have a time limit on a daily rate requiring a new payout statement after the time limit has passed. This could come into play when there is a transaction extension.
    • keep records of communications with the lender on the release of the mortgage – in the event of a delayed response from the lender you need to be able to prove that you made timely requests to the lender for the release, including the request for and receipt of the payout statement, and confirmation surrounding the time and details of actual payment.
    • When submitting the request for the release of the pre-existing mortgage, the purchaser’s lawyer must:
      • provide the payout funds
      • reference the mortgage accurately and completely – registration number, roll number etc.
    • In some cases, the lender may file the release directly and in some cases it may forward it to the applicable Registry for filing. The lawyer should keep a copy of all correspondence including the release if forwarded by the lender. In some jurisdictions, the release is not filed, only a notice is filed. The release copy may be necessary should a question arise, such as whether the release was intended to be a full or partial release - a common issue in subdivision developments.

Purchaser’s lawyer

  • Ensure the request for release forms part of the closing letter with registration particulars of the mortgage clearly specified
  • Have a proper bring-forward system for follow-ups to vendor’s counsel to ensure all undertakings for releases/discharges are received within a reasonable time

Mortgage held by a private lender

  • Submit the release of mortgage document to the private lender and/or their legal representative in advance of closing. A lawyer should only provide the mortgage payout funds in exchange for the signed release or an undertaking from another lawyer. The smaller the lender the more important it is to ensure no difficulties in securing the release in due course. By giving an undertaking to the purchaser’s lawyer, the vendor’s lawyer is exposed to liability, and the only way to eliminate this exposure is to ensure beyond a reasonable doubt that they can obtain the necessary release in due course.

Delays in receiving the release

  • Maintain a list of contacts. The mortgage payout statement should contain confirmation details on how to make payments and whom to contact. In the event of any delays, you can escalate the request. Provincial law societies have a list of mortgage discharge and escalation contacts.