Podcast Episode 6: “Mortgage Basics 6/9 – Corporate Mortgages and Personal Guarantees.”
Continuing with our mortgage podcast mini series, let’s look at assuming mortgages from a corporation and the issue of personal guarantees. There are certainly lots of details when it comes to mortgage law, which is why you need a lawyer to get a mortgage.
C. Alberta Mortgage Law
More principles of mortgage law specific to Alberta:
iv) Assumptions of Mortgages Granted by Corporations
If an individual purchases property and assumes a mortgage granted by a corporation, then the individual inherits the liability of the corporation and becomes personally liable for any deficiency unless that individual or a member of his family uses the property as their bona fide personal residence. If, however, the individual subsequently enters into an amending agreement with the lender where the terms of the mortgage are altered, then the protection against an action on the covenant will arise. If the mortgage was granted jointly by an individual and a corporation then the prohibition applies from the outset and therefore neither the individual nor the corporation can be sued for any deficiency.
v) Personal Guarantees
Individuals may also become liable to mortgage lenders by providing a personal guarantee for a mortgage. Commercial mortgages are usually granted by corporations and the lender will usually require the personal guarantee of the individuals controlling the corporation. Legislation unique to Alberta requires that any individual guarantor must appear before a Notary Public to acknowledge that he executed the guarantee, that he is aware of its contents and understands them. The Notary Public must attach a certificate of this acknowledgement to the Guarantee. In the absence of the Certificate, the personal guarantee is not enforceable.
Contact Barry McGuire now. Alberta real estate needs an Alberta lawyer.