A mortgage is a legal document that creates a guarantee. The registered building can therefore be used as collateral for a loan or other financial consideration. The person who gives the building or a share in it as collateral is called the mortgage debtor. The person who grants the loan and accepts the building as collateral is called the mortgage creditor. Note that only a registered building can be subject to a maritime mortgage.
The borrower of a mortgage on a building must be the owner of the building at the time the guarantee is taken.
Obtaining a mortgage-backed loan for the purchase of a building is therefore impossible. This rule deviates from the provisions of the Civil Code of Quebec which allow for the mortgaging of a property that one does not own, provided that one becomes the owner afterwards.
The financing of the purchase of a ship is therefore done in two stages. Initially, the buyer will obtain a temporary loan (bridge loan) secured by the obligation to mortgage the building in favor of the lender upon its acquisition. Subsequently, at the signing of the sale of the building, the building will be pledged as security for the loan.
A maritime mortgage can be used to secure the repayment of a debt or to fulfill any other obligation such as guaranteeing, performing or refraining from certain actions. As a result, maritime mortgages are commonly used to secure the repayment of a debt.
When there is more than one registered mortgage on the same building or a share in a building, the priority of the mortgages is determined based on their date, time, and minute of registration in the registry.
The rights and obligations of the parties will appear in a loan agreement. The negotiation and preparation of this agreement must take place before the registration of the mortgage.
Prudence dictates that a maritime mortgagee includes in the loan agreement the clauses that are usually found in a real estate mortgage loan agreement, but adapted to the specific purpose by adding specific clauses.
If you plan to buy a building or obtain a loan where a building will be used as collateral, it is necessary to examine the registrations in the registry. This examination of registered mortgages allows you to assess the mortgage status of the building you are considering buying, taking or giving as collateral.
There are no restrictions regarding the registration of mortgage creditors in the registry. Unlike the ownership rights of one or more shares of a building, which is limited to five registered co-owners, there is no limit to the number of individuals who can be registered as joint mortgage creditors.
Under the Canada Shipping Act, the first mortgage creditor has full powers in relation to the sale of the building, but their rights are subject to the provisions of the Bankruptcy and Insolvency Act and the mortgage agreement between the parties.
Given the complexity of the system, it is therefore important to consult Notaire-Direct because: