Limitations in the Real Estate Context
The Limitation period applying to matters concerning real property must be understood in light of the amendments made to the previous Limitation Act, 1990. That Act is widely known as having been repealed and replaced by the Limitations Act, 2002 (hereinafter the “New Limitations Act”) but less known for also having continued, in part, – Part I – to be specific, and renamed as the Real Property Limitations Act (hereinafter the “RPLA).Section 2 of the New Limitations Act makes clear that this Act does not apply to proceedings to which the RPLA applies. The RPLA is therefore, generally speaking, the “go to” legislation when dealing with limitation periods affecting real property.
I. Commercial Leases
Notwithstanding the foregoing, consider that a commercial lease – the subject matter of which is indisputably real property – will be subject to both the RPLA as well as the New Limitations Act. The challenge is therefore twofold; one must determine not only the limitation period governing but also the limitation legislation in the first place.
The challenge is surmountable when one begins the analysis by observing section 2 of the New Limitations Act. The key is therefore to determine whether the particular matter at issue is one specifically addressed in the RPLA, in which case, the limitation period therein prescribed will govern. In the event that the matter is not addressed by the RPLA, the New Limitations Act will apply.
By and large, actions commenced under the terms of a commercial lease concern the recovery of rental arrears. The subject of recovery of arrears of rent is specifically addressed by the RPLA which provides, at subsection 17 (1) as follows:
No arrears of rent, or of interest in respect of any sum of money charged upon or payable out of any land or rent, or in respect of any legacy, whether it is or is not charged upon land, or any damages in respect of such arrears of rent or interest, shall be recovered by any distress or action but within six years next after the same respectively has become due, or next after any acknowledgment in writing of the same has been given to the person entitled thereto or the person’s agent, signed by the person by whom the same was payable or that person’s agent. R.S.O. 1990, c. L.15, s. 17 (1).
Accordingly, a landlord’s statute of limitation for an action to recover arrears of rent or interest is six years from the date on which the amount becomes due or six years following written acknowledgement from the tenant owing the amount.
All other actions commenced under a commercial lease, the subject matter of which are not addressed by the RPLA, are therefore subject to the general two year limitation period set by the New Limitations Act. For example, an action respecting an alleged breach of representation, warranty, undertaking, and generally any clause of a lease not relating to recovery of rent arrears will be governed by the New Limitations Act. Particular examples include actions respecting:
- a landlord’s failure to carryout a structural restoration;
- a tenant’s failure to maintain the rented premises in a state of good repair;
- a landlord’s refusal to honour a right of first refusal clause secured to its tenant and respecting the sale of the leased building; and
- a tenant’s breach of covenant to seek and obtain written consent from the landlord prior to subletting the leased premises.
II. Mortgage Enforcement
Turning now to address the limitation periods applicable to mortgage enforcement the analysis begins in much the same manner. Typically, mortgage enforcement actions concern the collection of mortgage arrears. The first step accordingly, is to consider whether the RPLA applies so as to oust the application of the two year basic limitation period of the New Limitations Act. Subsection 23(1) of the RPLA provides as follows:
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. R.S.O. 1990, c. L.15, s. 23 (1).
The RPLA, therefore, imposes a ten year limitation period on mortgage enforcement actions. Furthermore, in order to restart the ten year limitation period one of two things must occur, namely:
1. payment made by the Mortgagor or Debtor to the Mortgagee/Creditor; or
2. written acknowledgement of the outstanding debt by the Mortgagor/Debtor to the Mortgagee/Creditor.
Therefore consider that if ten years have passed from the time the limitation period began to run and at no point during this time was a payment made or an acknowledgment in writing given by the party owing the money to the party to whom it is owed, the time for enforcement will have expired and the action to recover will be statute barred. As aforesaid, the clock restarts and a full ten years for enforcement is afforded each time that either a payment or an acknowledgement in writing is given by the debtor to the creditor.
As for when the limitation period of a mortgage actually begins to run, one is required to consider the case law. Two cases in particular shed light on this issue, namely, the 2004 Superior Court of Justice decision in Alter v. Csontos which was affirmed by the Ontario Court of Appeal two years later, and the 2005 Superior Court of Justice decision in Cioccio v. Cioccio. The two cases also addressed whether the limitation period begins to run at different times for “conventional” and “on demand” mortgages. In Cioccio, the Court held that:
Even if this were a demand mortgage, it is a question of law as to when the limitation period starts running. The case of Alter v. Csontos  O.J. No. 1590 discusses this issue. That case stands for the proposition that the right to receive the money accrues immediately upon execution of mortgage and therefore the limitation period starts running at the execution of the mortgage. The proposition asserted by the respondents that the limitation period begins to run when a demand is made would mean there would be no purpose to a limitation period. The mortgage could go on forever at the whim of the lender of the money. The Real Property Limitations Act must be given effect and the only possible interpretation is that the limitation period begins to run at the execution of the mortgage.  O.J. No. 1182 (Q.L.) para 13.
The issue of when the limitation period begins to run in the context of an on demand mortgage was furthermore considered by Justice Pattillo on a Summary Judgment Motion brought before the Court by Antonio P. Raviele of RV Law in tandem with Jesse Rosenberg on behalf of the mortgagor-defendants in the matter. Before awarding Judgment to the moving party mortgagors, Justice Pattillo found as follows:
In the present case the record indicates that on March 14, 1994 and on April 11, 1994, the then solicitors for the plaintiff wrote to the defendants concerning payment of the mortgage. The Plaintiff submits that these letters were not demand letters. There is no evidence from the Plaintiff indicting he had no intention to demand payment at that time. On a plain reading of the letters, particularly the letter of April 11, 1994 there is a clear demand for payment of the principle amount under the mortgage… Accordingly in my view, it is clear from the evidence that the limitation period began to run in this action either at the earliest time payment was due on the mortgage (March 4, 1994) or from the date of the demand letters (April 11, 1994). In either case, the action was commenced outside the 10 year limitation period (February 24, 2005).
Although it would appear from the above segment that the limitation period might begin to run sometime after execution of the mortgage, i.e., on the date of demand, Justice Pattillo did refer and rely on both the Alter v. Csontos and Cioccio v. Cioccio decisions in his reasons for judgment. Consequently, despite that a mortgage may be payable “on demand” a Mortgagee’s right to recover the money loaned accrues upon execution of the Mortgage and this right to recover will expire if not exercised within the ten year limitation period.
To conclude, it goes almost without saying that diligence is required in order to ensure that one’s rights are not extinguished by the passing of a statutory limitation period. Consulting legal counsel at the earliest opportunity is paramount in order to preserve enforcement privileges.