Ontario: the limitation of stand-alone mortgage guarantees

In Hilson v. 1336365 Alberta Ltd., the court determined, for the first time, the limitation period for a stand-alone mortgage guarantee agreement. A stand-alone guarantee that affects or relates to an interest in land, and includes covenants to pay money secured by a mortgage, is subject to a ten year limitation period under s. 43(1) the Real Property Limitation Act.

[41]           The application of a predecessor provision to s. 43(1) of the Real Property Limitations Act (being s. 49(1)(k) of the Limitations Act, R.S.O. 1914, c. 75) was considered by the Ontario Court of Appeal in Martin v. Youngson (1924), 55 O.L.R. 658 (C.A.).  In that case, the mortgagee commenced an action against the guarantor of the mortgage more than ten years after the mortgage became due.  If the predecessor to s. 43(1) did not apply, the limitation period would have been 20 years.   Pursuant to s. 49(1)(b) of the predecessor statute, the 20-year limitation period applied to “an action under a bond, or other indenture, except upon a covenant contained in an indenture of mortgage”.  The guarantee covenant in Martin was contained in the mortgage indenture, which the guarantor had executed.  At p. 663, the court found that the applicable limitation period was ten years, as indicated below:

Dealing now with the successive points argued by the appellant, I think that this is “an action upon a covenant contained in an indenture of mortgage,” and therefore comes within sec. 49, subsec. 1(k), of the Limitations Act. The whole document, exhibit 1, is an indenture of mortgage. I express no opinion as to what would be the proper conclusion if the guaranty were contained in a separate collateral document. That point can be decided when it arises. But, so far as this action is concerned, it seems to me that it falls precisely within the words of the statute, and therefore that the period of limitation is 10 years, and not 20. [Emphasis added.]

[42]           In its 2012 decision in Equitable Trust, the Ontario Court of Appeal considered and affirmed its previous decision in Martin.  As in Martin, the issue in Equitable Trust was the applicable limitation period where the guarantee covenant was contained in the mortgage indenture that the guarantor signed, rather than in a “separate collateral document”.  Counsel did not bring to my attention any subsequent decision that considered whether the ten-year limitation period would apply to a claim under a guarantee covenant in a separate document, the issue that Martin expressly left outstanding.

[43]           In Equitable Trust, the guarantor argued that the limitation period for the guarantee contained in the mortgage was two years, based on the following reasoning.  The guarantee covenant in that case was a demand obligation governed by ss. 5(3) and (4) of the Limitations Act, 2002.  Those provisions were intended to apply to all demand obligations, including a demand guarantee obligation contained in a mortgage indenture.  The court rejected that argument.  Relying on s. 2(1)(a) of the Limitation Act, 2002, the court held that the ten-year limitation period in the Real Property Limitations Act applied.  In doing so, the court stated as follows (at paras. 27, 28, 30 and 31):

27        … [T]he effect of s. 2(1)(a) of the Limitations Act, 2002 is to preclude the limitation periods of that Act from applying when the Real Property Limitations Act applies. Put simply, the Limitations Act, 2002, was enacted to deal with limitation periods other than those affecting real property.

28        A guarantee given in conjunction with a mortgage transaction affects real property law rights. Guarantors, if they have made payments toward the mortgage debt, need to be served in mortgage enforcement proceedings because they have an equity of redemption and an interest in the mortgaged property…. [Case citations omitted.]

30        It is true that it may not always be easy to determine whether a particular guarantee … is subject to the Limitations Act, 2002 or, like the guarantee in the case at bar, is subject to the Real Property Limitations Act. However, it does not follow that all guarantees should be treated the same way. It has been the case historically that guarantees associated with land transactions have different limitation periods from guarantees associated with contract claims. Moreover, as already noted, it is my view that the Legislature intended that all limitation periods affecting land be governed by the Real Property Limitations Act.

31        The mortgage enforcement practice, as demonstrated in the case at bar, is to give guarantors notice of power of sale proceedings. In my view, it would cause much more confusion and uncertainty in the law, if the limitation period for enforcing the mortgage debt was different from the limitation period for enforcing guarantees of that debt. [Emphasis added].

[44]           In its subsequent decision in Zabanah v. Capital Direct Lending Corp.2014 ONCA 872 (CanLII), 123 O.R. (3d) 350, the Court of Appeal acknowledged that it was appropriate to circumscribe the expansive expression in Equitable Trust (at para. 30) of the legislative intent that “all limitation periods affecting land be governed by the Real Property Limitations Act.”  In Zabanah, the assignee of a mortgage was unable to recover the amount due under the mortgage either from the mortgagor or upon the sale of the mortgaged property.  The assignee sued the original mortgagee for negligence and breach of contract.  Summary judgment was granted, dismissing the action against the original mortgagee on the basis that the action had not been commenced within the two-year limitation period in the Limitations Act, 2002.  The assignee argued on appeal that the ten-year limitation period in Real Property Limitations Act applied, relying on the statement in Equitable Trust that all limitation periods affecting land were governed by that statute.  The appeal court held that the motion judge was correct that the two-year limitation period applied.  The court distinguished Equitable Trust on that basis that the assignee’s action against the original mortgagee “is simply a negligence and contract claim, and is not a claim to an interest in land, as in [Equitable Trust].”

[45]           Defence counsel argued that as in Zabanah, the plaintiff’s claim against the Lightles under the stand-alone guarantees was a contract claim, not a claim to an interest in land.  By the same reasoning, the two-year limitation period would apply to the plaintiff’s claim against the Lightles under those agreements, according to the defence.

[46]            Defence counsel also argued that s. 43(1) of the Real Property Limitation Act does not apply because the stand-alone guarantees do not constitute an “other instrument … to repay the whole or any part of any money secured by a mortgage.”  While the term “instrument” is not defined in the Real Property Limitation Act, defence counsel referred to other statutory provisions to support his argument that the term “instrument” should be read as being limited to an instrument that affects or relates to an interest in land.  In his submission, the stand-alone guarantees did not fall within the meaning of “instrument” as that term was used in s. 43(1).

[47]           In particular, defence counsel referred to the definition of “instrument” in s. 1 of the Registry Act, R.S.O. 1990, c. R.20, as follows:

“instrument” includes every instrument whereby title to land in Ontario may be transferred, disposed of, charged, encumbered or affected in any other way, and, without limiting the generality of the foregoing, includes … a deed, conveyance, mortgage, assignment of mortgage, certificate of discharge of mortgage, … a contract in writing, … and every notice, caution and other instrument registered in compliance with an Act of Canada or Ontario;

[48]           Under s. 22 of the Registry Act, any instrument as defined in s. 1 may be registered under that Act, subject to specified exceptions.  As well, under s. 23 of that Act, the land registrar may refuse to accept for registration any instrument that, in the registrar’s opinion, does not affect or relate to an interest in land.  On the same basis, the registrar may refrain from recording part of a registered instrument.  As defence counsel also noted, there is no definition of “instrument” in the Land Titles Act, but s. 81 of that Act is to the same effect as s. 23 of the Registry Act.  Under s. 81 of the Land Titles Act, the land registrar may refuse to register all or part of an instrument on the basis that it does not affect or relate to an interest in land.

[49]           Applying the foregoing legislative provisions, it is clear that only instruments that affect or relate to an interest in land are capable of being registered under the Land Titles Act or the Registry Act.  Registration under those statutes provides public notice relating to ownership and other interests in real property in Ontario, and provides the basis for determining the priority of those interests.  What was not clear to me was why the meaning of instrument for registration purposes was determinative (or even relevant) when interpreting the meaning of that term for purposes of determining the limitation period for court proceedings, as set out in s. 43(1) of the Real Property Limitation Act.

[50]           In any case, plaintiff’s counsel did not dispute that the term “instrument” in s. 43(1) should be interpreted as meaning an instrument that affects or relates to an interest in land.  As explained further below, I agree with plaintiff’s counsel that the stand-alone guarantees are instruments that affect or relate to an interest in land, applying the reasoning of the Court of Appeal in Equitable Trust.  As well, by their terms, the stand-alone agreements include covenants “to repay … money secured by a mortgage”, that is, the second mortgages between the plaintiff and the corporate defendants.  Accordingly, I have concluded that the limitation period for the plaintiff’s claim under the stand-alone guarantees was ten years.

This reasoning seems sound to me, but I find the real property limitations scheme as arcane as everyone else.

Ontario: the limitation of mortgage enforcement

Curiously, posts about the Real Property Limitations Act receive the most views on Under the Limit.  My guess is that this reflects the murkiness of the Act more than people’s interest in it.  The Act is Part I of the former Limitations Act, renamed, but otherwise unchanged from its antiquated and impermeable glory.  When the Ontario limitations regime was being reformed, a complete review of limitations was too time-consuming, and so review of the real property limitation periods was abandoned to avoid delaying the other reforms.  Should you be interested, the legislative history is detailed here at paragraphs 27-33.

In the spirit of catering to my market, I present the decision in 552439 Ontario Limited v. Forbes Building Material Limited for its summary of the section 23(1) limitation period for mortgage enforcement:

Real Property Limitations Act

−        Paragraph 23(1) of the Real Property Limitations Act provides for a ten-year limitation period for the enforcement of a mortgage.  It reads as follows:


23(1)  “4.  No action shall be brought to recover out of any land or rent any sum of money secured by any mortgage or lien, or otherwise charged upon or payable out of the land or rent, or to recover any legacy, whether it is or is not charged upon land, but within ten years next after a present right to receive it accrued to some person capable of giving a discharge for, or release of it, unless in the meantime some part of the principal money or some interest thereon has been paid, or some acknowledgment in writing of the right thereto signed by the person by whom it is payable, or the person’s agent, has been given to the person entitled thereto or that person’s agent, and in such case no action shall be brought but within ten years after the payment or acknowledgment, or the last of the payments or acknowledgments if more than one, was made or given.”

−        It is the nature of the mortgage which will determine when the ten-year period is triggered.  The limitation cannot pass before the mortgagee has any right to enforce.  The limitation runs from the earliest time at which repayment can be required.


−        While there are exceptions, on a demand mortgage, the cause of action accrues upon execution of the mortgage.


–  Mortgage Insurance Co. of Canada v. Grant 2009 ONCA 655 (CanLII), [2009] O.J. No. 3769

–  Alter v. Csontos [2004] O.J. No. 1590

–  Cioccio v. Cioccio [2005] O.J. No. 1182


−        If the terms of the mortgage provide for payment upon the happening of a specific contingency, then the cause of action arises upon the happening of the contingency.  Thus, the ten-year statutory limitation does not run until the contingency is satisfied.


–  Re Gould Ex Parte Garvey 1940 CanLII 89 (ON CA), [1940] O.R. 250 (Ont. C.A.)

–  Canada Mortgage and Housing Corp. v. 447136 British Columbia Ltd. [2014] B.C.J. No. 497