The Rural Voice, 1993-03, Page 18Agrilaw
Notice default may void sale
Under the Farm Debt Review
Act, a mortgagee proposing to sell a
farmer's land must first provide the
farmer with notice of its intention and
the farmer's right to apply for farm
debt review. In a case now pending
before the Ontario Court (General
Division), the court has been required
to consider the consequences for the
sale of the property if the mortgagee
fails to give the required notice.
In the case in question, the
mortgagee had provided the notice
required under the mortgage and the
Mortgages Act of its intention to sell
the farm property. However, the
mortgagee failed to give the notice
required by the Farm Debt Review
Act. After expiry of the notice
period, the mortgagee proceeded to
sell the farm to a buyer who was
willing to take title with the farmer
still in possession. The farm was
thcn sold again by the first buyer to a
third party.
Unfortunately, the third party was
able to obtain first and second
mortgage financing on the land and
then defaulted under the second
mortgage. The second mortgagee
sold the land by
exercising its
rights under the
mortgage, with
the original
farmer still in
possession.
Upon
learning of the
various
conveyances of
the farm, the
farmer
immediately
started a court
action to set
aside the
conveyances and subsequent
mortgages on the grounds that all
such dealings were void as a result of
the failure of the original mortgagee
to provide notice as required by the
A farmer
is entitled
to
notice
under the
Farm
Debt
Review Act
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1895 — 100 years — 1995
14 THE RURAL VOICE
Farm Debt Review Act. Without such
notice, the farmer claims that all
dealings with his land are unlawful.
At the commencement of this
action, the court has been required to
consider whether to grant to the
farmer permission to register a notice
of his claim on title which would
effectively prevent dealing with the
property until the trial of the action.
Before granting such an order, the
court must be satisfied that the farmer
has a reasonable claim to an interest
in his land, despite the subsequent
transfers of the farm.
Although the Farm Debt Review
Act is silent as to the consequences of
a mortgagee's failure to provide the
mandatory notice, the court has
determined that the farmer should be
entitled to register notice of his claim,
even though he is no longer the
registered owner of the property.
Still to be determined at trial is the
issue of whether all dealings in the
property should be set aside because
of the failure of the original
mortgagee to provide the requisite
notice under the provisions of the
Farm Debt Review Act.
In the absence of any statutory
guidance, the court has been prepared
to recognize that any dealings with a
farmer's lands by a mortgagee
without the requisite notice to the
farmer are unlawful and may be null
and void. The Act provides that
"notice ... shall be given to the
farmer in the prescribed manner at
least 15 business days before the
taking of any action by the secured
creditor to realize on the security."
Breach of this mandatory notice
requirement may entitle the farmer to
set aside any sale of his land.0
Agrilaw is a syndicated colwnn produced
by Cohen Highley Vogel & Dawson, a full
service London law firm. Angelo D'Asca-
nio, an associate in the firm, practises in
the areas of commercial litigation, debtor/
creditor, bankruptcy and insolvency law.
Agrilaw is intended to provide information
to farmers on subjects of interest and im-
portance. The opinions expressed are not
intended as legal advice. Before acting on
any information contained in Agrilaw, read-
ers should obtain legal advice with respect
to their own particular circwnstances.