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ARTICLE · 16 DECEMBER 2022

How Do I Get All My Lender Fees?

Gardiner Roberts LLP
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In Canada, lenders who take mortgages on real property as security should be mindful of section 8 of the Interest Act (the "Act") and the relevant case law when drafting repayment provisions in a mortgage.

CanadaFinance and Banking
Zev Zlotnick
Zev Zlotnick
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In Canada, lenders who take mortgages on real property as security should be mindful of section 8 of the Interest Act (the "Act") and the relevant case law when drafting repayment provisions in a mortgage. Section 8 of the Act precludes lenders from imposing interest rates, fines, or penalties on any arrears of principal or interest secured by a mortgage on real property. The purpose of section 8 is to protect property owners against predatory lending practices.

The 2015 Ontario Court of Appeal decision, Parcel v. Acquaviva (2015 ONSC 331), set out the legal test for enforceability of lender fees and charges in mortgages that do not offend section 8 of the Act; as well as, when those fees and charges are recoverable. In Parcel, the Court held that where a fee or charge is a penalty that has the effect of increasing the rent due on outstanding arrears, that penalty will be in contravention of section 8 of the Act.

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