Private mortgage lending in Ontario can be a sound investment strategy — but only if lenders understand and respect the legal deadlines that govern their right to enforce. A lender who sits on a defaulted mortgage for too long can find that the courts will no longer come to their aid. Understanding limitation periods is not optional knowledge; it is a core part of prudent private lending.
Two Limitation Frameworks That Apply to Mortgages
Ontario private mortgage lenders must navigate two different limitation frameworks that interact in ways that can be confusing even for experienced practitioners.
The Limitations Act, 2002
Ontario’s general Limitations Act establishes a basic two-year limitation period for most civil claims. This applies to a mortgagee’s claim for personal liability — that is, the right to sue the borrower personally for the mortgage debt or a deficiency after a power of sale. A lender who waits more than two years from the date they knew (or ought to have known) of the default before starting a legal action may find their personal claim against the borrower is statute-barred.
The Real Property Limitations Act
The Real Property Limitations Act (RPLA) provides a longer — but still critical — limitation period specifically for mortgage enforcement against real property. Under the RPLA, a mortgagee has ten years to commence an action on the mortgage itself (the action on the covenant) and to exercise the power of sale or foreclose.
The ten-year clock generally runs from the date the cause of action arose — typically the date of the first missed payment or the date demand was made under the mortgage terms.
Why Private Lenders Get Into Trouble
Private mortgage transactions often involve more flexible, informal arrangements than institutional lending. A private lender may be a family friend, a high-net-worth individual, or a small syndicate. These arrangements sometimes lack the systematic monitoring and enforcement discipline of an institutional lender’s mortgage servicing department.
The result: private lenders sometimes allow defaulted mortgages to sit unaddressed for years. Perhaps the borrower keeps promising to pay. Perhaps the lender is reluctant to initiate enforcement against someone they know personally. Perhaps the lender is simply unaware that limitation periods are running against them.
By the time the lender finally decides to act — perhaps when the mortgage matures, or when they learn the property is being sold — it may be too late. An Ontario court will not assist a lender who has slept on their rights beyond the applicable limitation period.
The Albrecht Decision: A Cautionary Tale
Ontario courts have confirmed that private lenders who allow years to pass without enforcement steps can indeed lose their right to collect. Cases have turned on questions such as when exactly the cause of action arose, whether any acknowledgments of the debt reset the limitation clock, and whether partial payments interrupted the running of time.
For private lenders holding mortgages on which payments have stopped — even if the borrower is ‘working on it’ — the prudent course is to seek legal advice immediately. Do not assume that because the property has value, you can enforce whenever you choose. The law does not work that way.
Acknowledgments and Part Payments: Resetting the Clock
Ontario limitation law provides that the running of a limitation period can be interrupted or restarted in two main ways:
- A written acknowledgment of the debt signed by the borrower
- A part payment made by the borrower on account of the debt
If a borrower sends a cheque — even a small one — or signs a document acknowledging the outstanding balance, the limitation clock may restart from that date. This is both a protection for lenders (active debtors keep the debt alive) and a trap for borrowers (making a small payment extends the lender’s right to sue).
For lenders managing a portfolio of private mortgages, obtaining periodic written acknowledgments from borrowers on long-term or slow-repaying loans is a practical tool for managing limitation risk.
What Lenders Should Do Right Now
If you are a private mortgage lender with one or more mortgages in default — or approaching maturity without repayment — consider the following steps:
- Review the mortgage document to confirm the maturity date, interest rate, default provisions, and any notice requirements before enforcement
- Determine when the first default occurred and calculate whether the limitation period may be running
- Consult a mortgage lawyer about sending a formal demand letter, which documents the lender’s position and may restart certain limitation clocks
- If enforcement is warranted, move without delay — every month of inaction can be used against you
The cost of a legal consultation is a fraction of the cost of losing your right to enforce a mortgage due to a limitation period expiry.
Protecting Yourself Going Forward
For lenders entering new private mortgage transactions, strong documentation from the outset reduces limitation risk. Ensure your mortgage agreement clearly defines events of default, specifies when the lender can demand repayment, and includes a clear maturity date. Appoint an Ontario lawyer to act on your behalf — not the borrower’s lawyer — and ensure the mortgage is registered on title immediately.
Annual reviews of your private mortgage portfolio — ideally with your lawyer — are the best way to ensure that no mortgage is drifting toward a limitation problem without your knowledge.
Final Thoughts
Limitation periods are a critical and underappreciated risk in private mortgage lending. The law rewards lenders who act promptly and penalizes those who delay. Knowing your deadlines — and acting before they expire — is the difference between recovering your investment and losing the legal right to do so.
Ready to Get Legal Advice You Can Trust?
Goldstone Law Professional Corporation serves clients across Mississauga, Brampton, Oakville, and the greater GTA in real estate, corporate, estate, and mortgage law. Whether you are buying your first home, structuring a business deal, or planning your estate, our team provides the clear, practical legal guidance you need.
Visit goldstonelawpc.com or call us at 905-595-9917. We are located at 201-186 Robert Speck Parkway, Mississauga, ON L4Z 3G1.
Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified Ontario lawyer.
This article is provided for general information only and does not constitute legal advice. For advice about your specific situation, please contact Goldstone Law PC directly.