Private Mortgage

A private mortgage in BC is a loan secured against real property that is funded by an individual investor, a Mortgage Investment Corporation (MIC), or a syndicate of lenders rather than a chartered bank or credit union. Borrowers typically turn to private mortgages when they cannot qualify with prime or alternative (B-lender) lenders due to credit challenges, unverifiable income, or a property type that conventional lenders will not finance. Terms are usually short — often one year — and interest rates and lender fees are significantly higher than those offered by institutional lenders.

Yes. In British Columbia, anyone who carries on business as a mortgage broker or submits mortgage applications on behalf of borrowers must be licensed under the Mortgage Brokers Act (RSBC 1996, c. 313), which is administered by the BC Financial Services Authority (BCFSA). Individual mortgage brokers and sub-mortgage brokers, as well as the companies they work for, must hold the appropriate licence. Unlicensed mortgage brokering activity is an offence under that Act.

Under the Real Estate Services Act (RESA) and its Rules, a real estate licensee in BC who receives any referral fee, finder's fee, or other remuneration in connection with arranging or referring a client to a private mortgage must disclose that remuneration to all parties in the transaction. Licensees are prohibited from accepting undisclosed remuneration, and BCFSA — which assumed the regulatory functions of the former Real Estate Council of BC on August 1, 2021 — can investigate and discipline licensees who breach these disclosure obligations.

Under RESA and its Rules, a licensee must provide clients with all known material information about the transaction, including the existence and general terms of any private mortgage that could affect the client's decision. Where the licensee has a conflict of interest — for example, if they have a financial relationship with the private lender — they must disclose that conflict fully and in writing before any agreement is signed. BCFSA guidance makes clear that failing to disclose material information is a serious breach of professional conduct obligations.

Unlike some other Canadian provinces, BC does not use a power-of-sale process for mortgage default. When a private mortgage borrower defaults in BC, the lender must pursue a judicial foreclosure through the BC Supreme Court, governed by the BC Supreme Court Civil Rules and the Law and Equity Act (RSBC 1996, c. 253). The court controls the process, which may result in an Order Nisi, a redemption period for the borrower, and ultimately either a foreclosure order or a court-ordered sale.

Generally, a transfer of property in BC — including one resulting from a court-ordered sale following private mortgage foreclosure — is subject to Property Transfer Tax under the Property Transfer Tax Act at the standard rates: 1% on the first $200,000 of fair market value, 2% on the portion from $200,000 to $3,000,000, 3% on the portion above $3,000,000, plus an additional 2% on the residential portion of value exceeding $3,000,000. Certain exemptions exist but are narrowly defined; consult the current BC Ministry of Finance guidance to determine whether a specific transfer qualifies for an exemption.

Yes, a private mortgage can be registered as a charge against a strata lot in BC just as it can against any other form of freehold real property. The strata lot is a distinct legal parcel under the Strata Property Act (SBC 1998, c. 43), and a mortgage registered against it does not encumber the common property or other strata lots. However, a private lender should be aware that strata bylaws, special levies, and outstanding strata fees can affect the priority and recovery value of their security, so reviewing the strata corporation's Form B Information Certificate is advisable before advancing funds.

A private mortgage can be registered against farmland located within BC's Agricultural Land Reserve; the registration of a mortgage itself does not require Agricultural Land Commission approval. However, if the lender ultimately takes title through foreclosure and then wishes to use or subdivide the land in a non-farm manner, those activities are subject to the Agricultural Land Commission Act (SBC 2002, c. 36) and would require ALC approval. Parties considering private mortgages on ALR land should consult the ALC directly for guidance on any specific use or subdivision restrictions that could affect the property's value as security.

Private mortgage lenders and mortgage brokers operating in BC that are not federally regulated financial institutions are subject to the Personal Information Protection Act (PIPA) of BC, which governs the collection, use, and disclosure of personal information in the course of commercial activities. They must obtain consent before collecting personal financial or credit information, use it only for the purposes for which it was collected, and keep it secure. If they send unsolicited commercial electronic messages — such as promotional emails about mortgage products — Canada's Anti-Spam Legislation (CASL) also applies and requires prior express or implied consent.

Under the Wills, Estates and Succession Act (WESA, SBC 2009, c. 13), when a borrower dies, their real property and associated debts — including an outstanding private mortgage — pass to their estate. The executor or administrator of the estate is responsible for managing the estate's liabilities, which includes either maintaining mortgage payments, arranging refinancing, or selling the property to discharge the mortgage. The private mortgage remains registered on title and enforceable against the estate; the lender's right to pursue foreclosure through the BC Supreme Court is not extinguished by the borrower's death.