Reliance on mortgage payout statements

Red Door

The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses reliance on mortgage payout statements.

The situation

In anticipation of selling a property, lawyers obtain a mortgage payout statement (MPS) from the existing lender on title, setting out the money required to be paid in order to obtain a discharge of the mortgage. 

Problems can arise after closing when a lawyer, relying on an MPS, provides a solicitor’s undertaking to discharge a mortgage, only to discover that the lender will not release its security.

Practice Guidance

While Canadian courts have sided with lawyers in some of these cases, it is important for you to try and avoid this situation.

  • Request an MPS as early as possible prior to closing.
  • Conduct a search of title to confirm the security that is registered, and retain a copy of the abstract as evidence of your findings.
  • As lenders will often have registered and collateral encumbrances, make it clear that your request is for all security to be discharged as part of the sale.
  • Compare the statement received against the security (shown outstanding on title) to ascertain if it appears consistent or raises any questions.
  • Review with the vendor client their knowledge of mortgages/loans/security applicable to the property although clients are often uninformed or do not appreciate the situation.
  • Prior to commencing legal action, escalate the matter internally with the lender following the Canadian Bankers Association’s Contact List for Matters Involving Mortgage Discharges, available from your Law Society.

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