The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses chattel, and alternate security.

The situation

It is becoming more frequent for home owners to lease or purchase fixtures and chattels through separate financing arrangements. Fixtures may include air conditioning systems, hot water tanks, heat pumps, and solar panels. Chattels are moveable and may be included as part of the purchase. For example, a stand-alone dishwasher or an air compressor in the garage.

Lenders require that their lawyers give them assurances that their interests are fully protected. For example, a personal property lender removing an air conditioning system or furnace as a result of a default on the loan by the vendor would be a problem.

Lawyers need to check the status of leases or loans that apply to fixtures and chattel that are part of the purchase agreement.

Sample lender instructions

It is your responsibility to ensure that […]

all other security specified in the Mortgage Approval, such as chattel mortgage or assignment of rental under leases, is valid and binding, and has been registered or processed to give us, for our interest, all the protection necessary; and that all terms and conditions set out in the Mortgage Approval have been met and complied with;

Practice guidance

• Review the status of any chattels and fixtures that are part of the sale and may be subject to a lease or loan agreement.
• Review the lender’s instructions and be sure to report on any separate financing of fixtures and chattels that may affect the lender’s security. Consider provincial personal property security legislation in your review.

Note: Title insurance typically does not cover fixtures and chattels. Due diligence is required.