An agreement between two or more parties
that creates a legal obligation whereby
either of the parties pledges
himself/herself to the other that something
is or will be done. Covenants may be
positive such as stipulating the performance
of some act, or negative as in forbidding
the commission of some act.
Mortgage documents contain covenants
affecting both the mortgagee and mortgagor.
For example, a mortgage contains a mortgagor
personal covenant and covenants to pay taxes
and maintain the property.
A covenant that is not expressly set out
in writing or stated, but still creates a
positive or negative obligation.
Mortgages registered in a land registry
or land titles office can involve implied
covenants on the part of the mortgagor. In
Ontario, for example, if a mortgage does not
reference a set of standard charge terms
within the document, three statutory implied
covenants attach themselves. The first
implied covenant is often referred to as the
usual covenants , e.g., make mortgage
payments, pay taxes, insure building, and
grant of quiet possession when not in
default. The second implied covenant
provides that the mortgagor covenants that
the land held in fee simple is owned with
good title. The third covenant relates to
leasehold property wherein the mortgagor
covenants that the lease is valid and
up-to-date, and further that reimbursement
will be made by the mortgagor for
non-payment or non-performance of other
covenants under the lease.
The Real
Property Act states that unless otherwise
expressed, the transferee of a parcel of
land covenants to pay the principal money
and interest owing under a mortgage
registered thereon and will be bound by
every other covenant, term, or condition in
the mortgage. In other words, when a buyer
buys a property and has it transferred to
his/her name, the covenants and promises
contained in any previously registered
mortgage being assumed will be deemed to
have been accepted by the buyer as if he/she
had executed the actual mortgage document
itself.
Implied covenants can also apply to
deeds. As with mortgages, the covenants are
dictated by statute and not included with
the registered document.
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