The rules that apply when a mortgagee in possession is selling a piece of urban residential real estate, are not enough, when the property is something other than a cookie-cutter house on a cookie-cutter street.
Two appraisals and an ‘experienced’ real estate agent are not sufficient. Particularly if, the description ‘experienced’ really means negligent.
When Victoria & Grey Trust Company decided to advertise a ‘hobby farm’ in the local papers in Milton Ontario and rely upon two appraisals, the mortgagee assumed he was safe.
In Sterne v Victoria & Grey Trust Company (1984) CanlII 2073 (ONSC) Rutherford J. said no: even though there was a multi-step marketing process which included at least three offers. Even though the sale price ($185k) was only 18% below the best appraisal ($215k), this circumstance constituted improvident sale.
Why? Because there was reasonably considered to be a significant specialized national market, for this particular property with its particular attributes.
The operating principle here contemplates a continuum: the standard cookie-cutter house and lot, characterized by a deep and liquid local market of conventional buyers and sellers, exists at one end of that continuum. Here: two appraisals, local advertising and a marketing effort which can be objectively measured by well-established statistics (as to how long such a listing remains on the market before a down-movement on price is required) is the standard of care.
At the other end of the continuum are properties which have some unique characteristic. To the extent that such characteristic is a market-value characteristic and to the extent that the mortgagee ignores that characteristic or misses the implied requirement: (i.e. national treatment with contact to specialized buyers) such failure will be below the standard of care (i.e. mortgagee negligence).
The mortgagor tried to use Sterne in similar circumstances in Canadian Imperial Bank of Commerce v Conrad, 2019 NSSC 37 (CanLII) without success. The judge found the sale effort in that case to be sufficient. Conrad failed to demonstrate anything unique about the farm.
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