Ontario Court Of Appeal Confirms The Priority Of Secured Construction Lenders' Subsequent Advances In Face Of Execution Creditors' Notice Of Writ

• Published date: 01 July 2020
• Subject Matter: Real Estate and Construction, Construction & Planning, Real Estate
• Law Firm: Miller Thomson LLP
• Author: Ms Jessica Penley and Kenneth R. Rosenstein

Some more good news for secured construction lenders. In a decision rendered April 9, 2020, the Ontario Court of Appeal has confirmed that the priority of subsequent advances by lenders holding a charge of real property will not be defeated by actual notice of an unsecured execution creditors' writ of seizure and sale of the property.

In 1842752 Ontario Inc. v. Fortress Wismer 3-2011 Ltd.; [2020 ONCA 250], the Court considered the appeal of an execution creditor that had filed a writ of seizure and sale with the sheriff for lands in which the debtor had an interest and that had already been charged in favour of construction lenders. The execution creditor was appealing the dismissal of its application for certain declarations relating to its writ of seizure and sale. The declarations sought included a declaration that any advances made by the senior secured lender after it received actual notice of the writ would rank subordinate to the interest of the execution creditor of the charged real property.

The Court dismissed the appeal, with notable reference to two legislative provisions relating to priority. First, it found that the appellant could not avail itself of section 93(4) of the Land Titles Act (Ontario), as the appellant had argued, to create priority of the writ over subsequent advances by the secured lender by delivering notice of the writ. As the Court pointed out, this section of the Land Titles Act (Ontario) does provide that a subsequent registered transfer, charge or other instrument of which a prior secured chargee had actual notice would have priority over advances by the prior secured chargee made after such actual notice was received; however, a writ of seizure and sale is not the equivalent of a transfer, charge or other instrument executed by or on behalf of the chargor and so it does not benefit from the provisions of this section. In other words, notice of a writ does not...