Vendor Take-Back Mortgage Disputes

In a vendor take-back mortgage, the seller lends part of the purchase price to the buyer and takes a mortgage on the property as security. When payments stop or the terms are disputed, the seller is now a lender, and mortgage enforcement rules apply. We act for sellers enforcing these mortgages and for buyers responding to them.

Common situations

Missed payments on a vendor take-back mortgage, often registered behind a bank’s first mortgage
A disputed balance, interest rate or maturity date
A buyer who says problems with the property should reduce what is owed
Priority disputes between the seller and other lenders

For sellers

Enforcement generally follows the power of sale process under the Mortgages Act, with its notice requirements. See Mortgage Enforcement and Power of Sale.
A second mortgage is exposed if the first mortgage goes into default, so monitor it.
If a sale does not cover the debt, the buyer may remain personally liable for the shortfall under the mortgage covenant.

For buyers

A notice of sale starts fixed timelines. Read it carefully and get advice promptly.
Bringing the mortgage back into good standing or refinancing may be possible within those timelines.
Claims about the property are usually pursued separately from the mortgage.

What happens next

Review the mortgage terms and the payment history.
Confirm the amount properly owing, including interest and permitted charges.
Assess the other lenders on title and their priority.
Choose the route, whether a negotiated payment plan, refinancing, enforcement, or a defence in court.

Questions we are often asked

What is a vendor take-back mortgage?

A mortgage given by the buyer to the seller to secure part of the purchase price that the seller has agreed to finance. It is often registered behind a bank's first mortgage.

Can the seller sell my property if I miss payments?

A vendor take-back mortgage is generally enforced like any other mortgage, including by power of sale, subject to the notice periods in the Mortgages Act. See our page on mortgage enforcement and power of sale.

Can I stop paying because the property had problems the seller did not disclose?

Generally, a claim about the property is a separate claim and does not by itself allow a buyer to stop paying the mortgage. Stopping payment can lead to enforcement, so get advice before doing it.

What happens if the first mortgage is also in default?

The first lender's enforcement can affect the vendor take-back lender's security, because the first mortgage is usually paid first from any sale. A seller holding a second mortgage may need to act quickly to protect its position.

General information about Ontario law, not legal advice about your situation. Time limits can be short; if you are unsure, speak with a lawyer promptly.