What Mortgage Payments Are "Advances" That Have Priority Over Lien Claims?


A recurring issue for construction and builders liens is whether the liens have priority over mortgage advances. One question which does not often arise is: what sort of payments by a mortgagee do constitute "advances" under a mortgage? In other words, what sort of payments by a mortgagee can even qualify for priority over lien holders?

A mortgagee may make payments for many reasons, but a lien holder may question whether the payment qualifies as an "advance" under the mortgage. The British Columbia Court of Appeal looked at this issue.

What may not be obvious in each case is whether the advance made by the mortgagee is an "advance" and whether it is "in respect of" or under the mortgage. If it is not, then according to the Peri Formwork decision, the payment will not obtain priority over competing lien claims.

construction liens, priority, mortgage advances, receiver, foreclosure proceedings

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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