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REAL ESTATE commercial mortgage defaults, because these areas of law often overlap and the lawyers' expertise can complement one another. For example, he says, it used to be relatively simple for a lender to ap- point a manager to oversee a property whose owner had defaulted, but now there is a new level of complexity in- volved because such a manager might be considered to be a receiver under bankruptcy legislation. Silvana D'Alimonte at Blakes, who has also conducted seminars for col- leagues and helped put together a lengthy law firm bulletin on mortgage enforcement, notes that lenders and their lawyers in Ontario have a distinct advantage over those in other prov- inces where there are no provisions for private powers of sale, whereby defaults can be handled and securities realized more quickly and cheaply in an out- of-court process that takes about six months, compared to a judicial process that typically extends over two years. She says one of the first responsibili- ties lawyers have in mortgage defaults is to ensure that clients understand the pros and cons of each approach. Even though one might assume quicker is better, she points out that a protracted foreclosure action may be more at- tractive to some lenders in a depressed market since an immediate sale may not generate enough funds to cover the debt, whereas the lender who becomes the owner of the property through a foreclosure action may be able to sell it for more money later. It's also important to do things in the right order in managing a mortgage enforcement process, says D'Alimonte. Under a section of the Ontario Mort- gages Act, a lender can't take any further proceedings for 35 days after issuing a notice of sale. This means, for example, that if you issue the order towards the end of a month, just before the rents are due, you may be unable to collect rents from tenants in that month and the next. There are also various potential pit- falls to avoid and challenging decisions to make about how to handle existing tenants, D'Alimonte says. "Typically, tenants are the lifeblood of a project, Untitled-6 1 the income stream that creates the value," she says, noting that lenders are usually well-advised to take steps to ensure that lease agreements remain intact, especially in a depressed market where a tenant might want to take ad- vantage of an opportunity to terminate a lease arrangement to find a cheaper one elsewhere. In fact, in a depressed market, Pearlstein suggests that "keep- ing tenants may be more important than selling the property." Commercial mortgage enforcement is an area fraught with complexity, says D'Alimonte. "It's a rule of thumb that lawyers spend 10 times more time in en- forcement of a mortgage than putting one in place." Freelance journalist and business writer Kevin Marron can be reached at kevin@ kevinmarron.com Editor-in-Chief: Harvey M. Haber, Q.C., LSM with numerous leading experts as contributors The long awaited new edition of a classic text Take advantage of the reliable and up-to-date guidance of 51of Canada's top commercial leasing practitioners of the day with Shopping Centre Leases, Second Edition! This collection of updated as well as new articles and precedents covers all aspect of commercial leasing: Technology and Telecommunications Concerns Pandemic Preparedness for Building Owners and Managers Insurance for Shopping Centres Leasing Aspects of the Franchise Relationship Transfers of Lease, Assigning, Subletting and Change of Control Operating Costs and other Additional Rents in a Commercial Lease from a Landlord's and Tenant's Perspective Agreements to Lease, Letters of Intent and Term Sheets This resource includes numerous precedents to help you draft your own agreements and a table of cases to help you locate the decisions you need. Shopping Centre Leases - considered the definitive resource on the subject since its inception in 1976 Now updated, revised and renewed to bring you the same powerful guidance today. Order your copy today! www.canadalawbook.ca CL0109 www. C ANADIAN Law ye rmag.com JANU AR Y 2009 23 12/16/08 3:13:06 PM