Superpriorities and Mortgage Lending Transactions

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Real Estate–Mortgage Lending, October 2010

Lenders advancing funds on the security of real property are no doubt aware of the extensive due diligence required prior to closing. The due diligence must be performed to ensure that the real property being secured is, among many other things, free from financial encumbrances. A review of title to the subject property will help identify whether any mortgages or other financial encumbrances are registered against title but will most likely fail to disclose the existence of any superpriority claims against the assets of the borrower.

Superpriority claims are liens created pursuant to legislation that provide the relevant governmental entity with a first priority claim over all the assets, both real and personal, of a tax collector that has collected but not remitted certain taxes and other source deductions to the relevant government