Service Standards Loan Taking on TL
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SERVICE STANDARDS – LOAN TAKING
Applies to Ontario and Atlantic Canada: New Brunswick, Newfoundland, Nova Scotia and PEI
The following provisions constitute instructions and are deemed incorporated into any mandate or instructions given by BDC to a solicitor. Acceptance of any mandate incorporates acceptance of these terms. This form will change from time to time and should be checked on line for changes when instructions are received.
Recent Changes (see sections in red in body of document as follows):
• June 8, 2020:
Section 3 (vii) – further clarification with respect to electronic signatures
Section 11(vi) – clarification for serial numbered good registrations
TABLE OF CONTENTS
PART I – Doing Legal Work for BDC
1. Legal Entities 3
2. BDC Expectations and Communications 3
3. Acting for BDC 4
4. Small Loans 6
5. Equipment Line Loans 7
6. Loan Disbursement 8
7. Reporting 9
8. Loan Amendments 11
PART II –Security Taking Topics
9. Miscellaneous Topics 12
i. Multiple Jurisdictions 12
ii. Insurance on Assets 12
iii. Insurance Confirmation Checklist 15
iv. Life Insurance 15
v. Prior Permitted Charges 16
vi. Searches 17
vii. Landlord’s Undertakings and Waivers 17
viii. Loans to Corporations TBI 17
ix. Share Purchases 17
x. Alberta Guarantee Acknowledgement Act 17
xi. Pari Passu and Asymmetric Co-Lending 18
xii. Purchase Money Security Interest (PMSI) 18
xiii. Buyback Provisions/Development Agreements/Restrictions 18
10. Mortgages of Land 18
i. Taxes 18
ii. Readvanceable Mortgages 18
iii. Existing Readvanceable Mortgages 19
iv. Existing Readvanceable Mortgages – Surveys 19
v. Mortgages Not on Demand 19
vi. Capped Mortgages 19
vii. Mortgage of Lease 20
viii. Ontario Mortgage Forms 20
ix. Atlantic Mortgage Forms 21
x. Condominiums 22
xi. Holdbacks for Construction Loans 22
xii. Surveys and Title Insurance 22
xiii. Prior Inactive BDC Mortgages 25
11. Personal Property Security 25
i. Registration 25
ii. Equipment Lists 25
iii. Fixture Filings 25
iv. Assignment of Shareholder’s Loans & Guarantees 26
v. General Security Agreement 26
vi. Existing General Security Agreements 26
vii. Charges on Rolling Stock/Railway Equipment 26
viii. Intellectual Property 26
ix. Charges on Aircraft – International Registry 27
x. Security Over Fishing Licences and Marine Mortgages 28
Schedule A – Title Insurance Endorsement (First Canadian) 29
Schedule B – Title Insurance Endorsement (Stewart Title) 31
Schedule C – Title Insurance Endorsement (Chicago Title) 34
PART I – Doing Legal Work for BDC
Legal Entities
• Business Development Bank of Canada - BDC is a federal crown corporation created by the Business Development Bank of Canada Act. It is a continuation of the former Federal Business Development Bank and stands possessed of all security granted to the FBDB that may still be outstanding.
• Business Development Bank of Canada Act S.C. 1995, Chapter 28
Continuation of Federal Business Development Bank -- s. 3(1)
3. (1) The Federal Business Development Bank established by the Federal Business Development Bank Act is continued as a body corporate under the name "Business Development Bank of Canada".
• AlterInvest Fund LP and AlterInvest II Fund LP – BDC is the general partner and until recently most of the loans/investments made by the Subordinate Financing Group of BDC have been made under AlterInvest II Fund LP. Older loans and investments were made under AlterInvest Fund LP and prior to that under BDC. The Subordinate Financing Group and a Business Centre sometimes have a common client. In that case a priority agreement may be required between BDC and an LP.
• BDC Capital Inc. – this subsidiary is now used primarily by our Subordinate Financing Group for new clients.
BDC Expectations and Communications
1 Dealing with BDC Staff
You will direct all your correspondence and inquiries to, and receive your instructions from, the BDC representative who issued your instructing letter (the “S&D Officer”). You may contact BDC’s internal Legal Services directly for technical questions, if required.
2 Form of Correspondence
Written correspondence with the S&D Officer may be conducted by e-mail, surface mail or fax.
3 Reliance
• We are completely relying on you to place the required security in an enforceable fashion and in the rank of registration as per each Instructing Letter we may send to you. We will not be reading or checking any security that you provide.
• You will not provide BDC with legal documents for our review. If you require BDC’s direction as to a particular form or change to a form, you are to provide your recommendation to the S&D Officer together with sufficient commentary so that BDC can make a decision on the question.
• Documents, such as priority agreements, presented to the S&D Officer for signing should only be presented with your recommendation that they should be signed and not for BDC’s consideration or review. If you require a decision as to some specific issue in the form, you should set that out in writing to the S&D Officer and provide your recommendation.
4 Letter of Offer
Our Letter of Offer constitutes our only loan contract and sets out our required security and the rank of registration of that security that we require you to obtain. Any change in the security requirements requires an amendment to the Letter of Offer, which the S&D Officer will prepare after the change is approved and arrange to have signed. If you recommend any change in the security, please do so in writing to the S&D Officer or instructing office and await approval in writing before making any changes.
If you receive a change in instructions orally you are to confirm that change in writing back to the S&D Officer.
5 Response Times
Feedback from BDC clients indicates concerns about the time required to complete security in many cases. While BDC appreciates that there can be any number of causes of delay outside your direct control, in an effort to avoid delays and to identify problems quickly, please adhere, as a minimum, to the following requirements:
• The client is to be advised of the documentation and information you require within two (2) business days of your receipt of the Instructing letter;
• If the client has not responded within two (2) business days of your request, follow-up by telephone is required, and advise BDC;
• Searches must be ordered within two (2) business days of receipt of the search data;
• BDC is to be advised immediately of any problems encountered in the searches; and
• All the documentation should be submitted only when the file is complete. If you cannot complete the security within forty-five (45) days of the date of the Instructing Letter, advise BDC.
Acting for BDC
1 Contact Solicitor
• BDC will direct its loan taking work to a Solicitor in a firm who will be responsible for the relationship with BDC and conduct of BDC loan taking files in that firm for that city or province (the “Contact”).
• Where a firm has offices in more than one city, there may be different Contacts named by BDC for different cities.
• Instructing Letters for loan taking work going to that firm will normally be directed to the Contact. If instructions are to be sent directly to another solicitor in that firm the written approval of the Contact is required.
2 Delegation
• Regular Loan Taking (loans for $10M or less) - The Contact may delegate all or part of the legal work to other professionals in their firm to limit costs or satisfy client preferences provided that the delegated professional satisfies BDC’s requirements for errors and omissions insurance. The Contact may engage legal professionals of their choice in other jurisdictions as necessary for searches, registration or security completion. Involvement of professionals at a higher hourly rate requires the approval of the S&D Officer.
• Loans where the loan amount is over $10,000,000 – The Contact has been selected for their personal skill and qualities and must remain in active control of all files instructed. They may delegate parts of the work to other professionals in the firm or agents at the same or lower hourly rate, as they feel appropriate within this limitation. The Contact may engage the services of legal professionals of their choice in other jurisdictions as necessary for searches, registration or security completion. Use of another professional or agent at a higher hourly rate requires the approval of the S&D Officer.
3 Acting For BDC and the Borrower
This is not permitted on loans over $3,000,000 without the consent of internal BDC Counsel. It is permitted on loans under that amount if there is clearly no conflict.
4 Insurance
You will maintain per claim errors and omissions insurance in an amount at least equal to the amount of any loan instructed to you.
5 Confidentiality
BDC owes its clients an obligation of confidentiality as set out in section 37 of the Business Development Bank of Canada Act and you are required to keep the borrower’s and guarantor’s information confidential beyond such release as is necessarily permitted for the loan security taking process.
37.(1) Subject to subsection (2), all information obtained by the Bank in relation to its customers is privileged and a director, officer, employee or agent of, or adviser or consultant to, the Bank must not knowingly communicate, disclose or make available the information, or permit it to be communicated, disclosed or made available.
(2) Privileged information may be communicated, disclosed or made available
(a) for the purpose of the administration or enforcement of this Act and legal proceedings related to it;
(b) for the purpose of prosecuting an offence under this Act or any other Act of Parliament;
(c) to the Minister of National Revenue solely for the purpose of administering or enforcing the Income Tax Act or the Excise Tax Act; or
(d) with the written consent of the person to whom the information relates.
6 Security Forms
• You will use the standard BDC forms available on the Internet – bdc.ca/forms (English forms) or (French forms). If it is necessary to use a different form where a standard BDC form of that type is available you must obtain the prior consent of internal BDC Counsel.
• Tip Sheets – some forms come with a disposable coversheet with specific instructions as to the use or completion of that form. These coversheets constitute instructions.
• Modification of Forms – The standard BDC forms should not generally require modification but if you feel it is necessary to make minor changes in order to provide valid, effective and enforceable security you may make those changes but must advise as to the particulars and nature of those changes in your Solicitor’s Report. Any substantial changes to our security forms must be approved by BDC’s Legal Services department prior to disbursement, accompanied by the particulars of the changes and your opinion as to how these changes affect BDC’s required security.
• Priority Agreements – Although there is a priority agreement in the package of standard BDC documents its use is not mandatory (subject to the following bullet point) as the circumstances of loans vary widely and we look to you to use such forms and wording as you feel appropriate to put BDC in the required priority position. You do not have to comment in your report on changes to that form, if any.
• Priority/Subordination Agreements must not contain standstill or other enforcement restrictions that are operative against BDC unless such are specifically approved in the Letter of Offer, approved by written instruction from BDC Legal or approved by amendment to the Letter of Offer for the relevant loan.
• BDC and RBC have agreed upon three forms of priority agreement to be used on loans involving mutual customers. Form A contemplates that RBC will have priority over inventory and accounts receivable, with BDC having first priority over the remainder of the borrower’s personal property. Form B contemplates that RBC will have priority over inventory, accounts receivable and specific listed equipment, with BDC having first priority over the remainder of the borrower’s personal property. Form C contemplates that BDC will only have first priority over specific listed equipment, with RBC having first priority over the remainder of the borrower’s personal property. If you are instructed on a loan where RBC is the other lender, you should use the applicable form. The forms are available with the other standard BDC forms available on the Internet.
• Other Forms – If forms other than those standard forms provided by BDC are required we expect you to prepare such forms.
7 Document Signing
Where the borrower or guarantor wishes to sign security documents in your presence, we would request that you accommodate them rather than requiring them to engage counsel. In this case we would expect that you would have such persons sign an additional document indicating that no legal advice was sought or given, that they had the opportunity to seek other counsel, etc.
Exceptions:
• You will be expected to require independent legal advice for a borrower or guarantor where you feel those concerns arise on the information before you.
• In those cases where you are not able to provide signing services internally we would expect you to have arrangements with an arm’s length law firm who would provide signing services at a reasonably modest fee.
BDC will accept electronic signatures obtained through electronic signature platforms (e.g. DocuSign, VeriSign; OneSpan Sign) on security and corporate documents for loans that are instructed to external counsel provided you are satisfied that: (a) the security has been duly and properly authorized and executed, (b) you are permitted by your provincial Law Society or Bar Association to use electronic signature platforms to collect signatures from clients, and (c) handwritten signatures are not legally required to be enforceable against the signatory, such as, for example, Alberta personal guarantees. BDC also does not accept electronic signatures on promissory notes in its favour.
Small Loans
The Instructing Letter may identify a loan as a "Small Loan" for security taking purposes, and for which reduced requirements apply. As to Small Loans only, where there is a conflict between this section and requirements elsewhere in this document, the requirements of this section govern.
1 Searches/Priorities–Restricted Requirements
• No searches are required including governmental lien searches, PPR searches, etc.
• Although the Letter of Offer requires a particular ranking of security, you are not expected to confirm priority of registration.
2 Insurance
Unless specifically instructed otherwise, you are not expected to confirm that insurance is in place
3 Company Status
• No opinion is required as to the corporate capacity of either the borrower or the guarantor. However, we do expect you to search the provincial corporations registry to confirm the identity and existence of the corporation.
4 Solicitor’s Report
• No Solicitor’s Report is required. Instead, we only require your written confirmation that security has been received and registrations are completed.
5 Loan Disbursement
• Funds will be disbursed to the borrower directly by BDC unless your assistance is specifically requested prior to disbursement. Prior to disbursement we will require you to submit:
• Written/faxed confirmation that security taking has been completed and registered; and
• Your final account.
6 Your Account
• Your account, when received at the same time as your confirmation that security is complete, will be paid from loan funds. Subsequent to disbursement you must collect any outstanding amount directly from the client. We require a copy of your account in all cases.
Equipment Line Loans
The Instructing Letter may indicate that we have authorized an Equipment Line Loan (EL Loan). Such loans may be processed separately or concurrently with a regular term loan. An EL Loan establishes a loan facility that can be drawn upon by the borrower over a period of 12 months to facilitate the purchase of specific items of equipment. Normally the equipment purchased under the EL Loan will not be identified at the time the security is prepared and registered. However, you may occasionally receive equipment lists relating to equipment financed under an EL Loan. When that happens, you will need to assess BDC’s priority in respect of the listed equipment, as described below.
As to EL Loans only, where there is a conflict between this section and requirements elsewhere in this document, the requirements of this section govern.
1 Searches/Registrations
(The special requirements for Small Loans contained elsewhere in these Service Standards, do not apply to EL Loans.)
For all EL Loans, you will obtain the security called for in the Letter of Offer relating to the EL Loan and will complete all Corporate and PPR searches required in that regard. You must either register a GSA or confirm that BDC has an existing GSA that is properly registered and enforceable against the Borrower’s assets. In addition, you must specifically determine whether BDC has priority on equipment that may be financed by BDC under the EL Loan in the future.
At the time that you are instructed to prepare security, you may receive a list of equipment, prepared by BDC, which is being financed in connection with an EL Loan. If so, you must not only determine whether BDC has priority on future equipment that may be financed under the EL Loan (as outlined above), but you must also complete such additional searches and registrations as are necessary, including registrations against any ‘serial numbered goods’ (as defined in applicable PPSA legislation), to confirm that BDC has a first security interest on the specific equipment shown on BDC’s list.
You are not expected to negotiate priority agreements in connection with EL Loans. However, using the Security Confirmation form described below, you must provide BDC a list of all creditors that may have priority over equipment financed by BDC under the EL Loan, including both future equipment purchases and any equipment shown on BDC’s equipment list.
3 Loan Disbursement
You will not be involved in the disbursement of EL Loans. All disbursements on EL Loans will be handled directly by BDC’s Security & Disbursement Group.
4 Security Confirmation
Immediately upon execution and registration of the security required in the Letter of Offer relating to an EL Loan, you will prepare a Security Confirmation form and send it by email to the BDC representative from the Security & Disbursement Group who instructed you on the EL Loan. The “Security Confirmation – Equipment Line Loan” form can be downloaded from our website at: [bdc.ca/forms].
When completing the Security Confirmation form you must check all boxes that apply to a particular loan. In general terms, we require that you indicate whether BDC has priority on the goods listed in any BDC equipment list that has been provided to you, and whether BDC has priority on all other equipment that may be financed under the EL Loan in the future.
In the Security Confirmation form you must provide a list of all creditors that may have priority over BDC’s security interest in equipment. You should only list creditors with general registrations ahead of BDC, or subsequent general registrations that have priority over BDC by operation of an existing priority agreement. You are not required to provide a list of item specific registrations or serial numbered goods unless such registrations are an exact match to pieces of equipment shown on an equipment list that has been provided to you in connection with the EL Loan.
Your Security Confirmation will be relied upon by our Security & Disbursement Group to prepare and obtain item specific waivers/priority agreements from the creditors that you have identified as having priority over BDC’s security interest.
5 Insurance
You verify insurance coverage on EL Loans in the same manner that you would for any other loan. Those requirements are set forth in the Insurance Section of these Service Standards.
7 Solicitor’s Report
You will issue your Solicitor’s Report and deliver the security documentation for the EL Loan as soon as possible after security is complete. This should be done regardless of whether the loan has been disbursed. Please follow the standard reporting procedures contained in these Service Standards.
8 Solicitor’s Account
Depending on the nature of the loan, the EL Loan Program may require that BDC pay the legal costs associated with obtaining security for, and disbursing the EL Loans. The section of the Letter of Offer entitled “Legal Fees and Expenses” identifies whether the legal costs and fees are to be paid by the Borrower or BDC. Where the Letter of Offer provides that BDC is to pay the legal costs and fees, you will render a separate invoice to BDC for the costs associated with the preparation and registration of security for the EL Loan. That invoice will be paid directly by BDC and you should not deduct the costs associated with the EL Loan from any disbursement made to the borrower. Your invoice for the EL Loan should be submitted for payment to the representative of BDC’s Security and Disbursement Group who instructed you.
In the event you are concurrently instructed to complete an EL Loan for which BDC is to pay the legal costs and fees and a Term Loan, you will invoice BDC for the EL Loan and deduct your fees and disbursements for the Term Loan when that loan is disbursed.
If the Letter of Offer provides that the Borrower is to pay the legal costs and fees, you should recover your fees and disbursements directly from the Borrower. Unless specifically otherwise approved, BDC will not pay your account.
Loan Disbursement
Prior to the release of any funds to you, BDC requires notice in writing (e-mail or fax are acceptable) that the security called for in the Letter of Offer is complete, in accordance with BDC instructions. Funds will be released to you on your request, but should only be requested if you are in a position to disburse them to the client immediately. Any delay in the release of funds must be reported to the S&D Officer as early as possible.
• Conditions Precedent– Satisfaction of conditions precedent is generally dealt with directly between the S&D Officer and the borrower but must be satisfied prior to disbursement so you should confirm this with the S&D Officer before requesting funds.
• Conditions Precedent Contract Review – The Letter of Offer may require review of a lease, franchise or other agreement to be satisfactory to BDC’s lawyers or BDC’s legal advisors. We are expecting you to conduct this review and advise as to the basic outline and effect of the contract, whether it is consistent with the terms of the loan’s “Project and Financing”, security and underlying conditions and conditions precedent as set out in the Letter of Offer and if there are any unusual terms that would negatively affect the BDC’s position.
• Except for “Fast Track” disbursements, loans will normally be disbursed through your office and funds will be wired to you in trust. Please provide the S&D Officer with a voided trust account cheque to provide account information for the transfer.
• Fast Track refers to the early advance of part of the loan directly from BDC to the borrower prior to the security being completed. In this case a promissory note is taken by BDC and held temporarily until the security is complete. This is only done on some loans and may be referred to in an underlying condition in the Letter of Offer.
• At the time each loan disbursement is wired or otherwise delivered to your office, you will receive a covering letter from BDC that may contain additional specific instructions. In the event of a discrepancy between that letter and these instructions, that letter will govern.
• Any use of the borrowed funds or any request that you direct funds in a manner not in accordance with the “Project and Financing” set out in the Letter of Offer must be reported to the S&D Officer in writing immediately.
• Loan proceeds used to repay existing BDC loans will be applied internally by journal entry. No cheque will be issued for such amounts.
Reporting
1 Form of Report
BDC’s form of Solicitor’s Report must be used in all cases unless another form is otherwise previously approved by Legal Services. Please go to bdc.ca/forms to download the report.
Where existing GSA’s or existing mortgages are used, they are to be referred to in the Solicitor’s Report.
2 Prior Charges
We require the Solicitor’s Report to opine as to the priority of registration of BDC’s charges as against other registered charges, to indicate which prior registered charges are to remain outstanding (must be permitted) and which are to be discharged. BDC recognizes that you cannot certify as to priority over personal property absolutely given the uncertainty of title in personal property and unregistered claims that might appear, but we do expect you to do the usual searches as you deem necessary and to address any registered encumbrances or liens encountered.
It is not acceptable to attach a PPR search and advise that BDC security is subject to the charges listed. You are to do that analysis and confirm that our security is in the required priority of registration given the dates and terminology of the registrations located.
If BDC has been provided with a Solicitor’s Report reciting that certain encumbrances are to be discharged before the security is complete, we must as soon as possible thereafter be provided with your confirmation of their discharge or a letter of no further interest as may be appropriate.
3 Opinions - Corporations, Partnerships and Trusts
• Traditional opinions as to capacity, authorization and execution are required for corporations and all non-corporate entities (partnerships, trusts, etc.,) where the loan amount (total of all concurrent loans instructed to you) exceeds $5,000,000. However, when the total of all concurrent loans does not exceed $5,000,000, we do not require the traditional opinion. This is intended to reduce cost and time and to eliminate the practise of asking borrower’s counsel to provide a certificate on these points. In such circumstances, and absent any contrary knowledge, you will limit your investigation of capacity and authorization:
• for corporate borrowers or guarantors to:
i. Officers Certificate confirming incumbent officers and signatories and confirming there are no proceedings for winding up;
ii. Searches of the provincial/territorial corporate registry and, to the extent locally possible, certificates from those registries confirming the corporation’s incorporation, status and directors and officers; and
iii. Certified copy of Director’s Resolution approving the transaction.
• for borrower or guarantors constituted as partnerships or trusts to:
i. A review of the Partnership/Trust Agreement;
ii. Searches of the provincial/territorial registry and, to the extent locally possible, certificates from those registries confirming the partnership’s registration; and
iii. Statutory declaration from the partner/trustee confirming that the partnership/trust authorizes the loan, has capacity to provide the requested security and to stand as a borrower or guarantor on the loan, and confirming the name of the person authorized to execute the loan documents to bind the partnership/trust.
• Corporations, Partnerships and Trusts not granting security – Where a corporation, partnership or trust is a borrower or guarantor, jointly or individually, under the Letter of Offer but is not granting a mortgage, general security agreement or other security, we would still expect the corporate/partnership/trust opinion issue to be addressed in accordance with this section.
4 Foreign Corporations
• Given the high cost of obtaining opinions relative to foreign corporations, you are to discuss with the S&D Officer whether such opinions are required on a particular loan. You may take their written direction on this point but must refer to it in your Solicitor’s Report. In any case where we are taking security over foreign assets we will want confirmation of enforceability which may require opinions from foreign counsel. If foreign counsel is required, please see Section 8 i) Multiple Jurisdictions below.
5 Delivery of Security Documents and Report
Format
Beginning on March 24, 2017, BDC will no longer require delivery of paper versions of the security documents, except for the following documents which must be tendered in paper format for enforcement purposes:
• Letters of credit obtained from other lenders;
• Marine Mortgages;
• Duplicate Certificates of Titles (when used in place of a mortgage);
• Assignment of Securities for share certificates in original form;
• Hypothecation of Shares in original form;
• Hypothecation of Source Code, Software;
• Promissory Notes prepared by external solicitors as part of continuing loan security;
• U.S. Debentures and U.S. vehicle registrations;
• Personal Guarantees given by Alberta Residents or required in connection with loans from Alberta Business Centres where a Guarantee Acknowledgement Act certificate is required;
• Any other documents that cannot be enforced from an electronic record.
Subject to the foregoing, we require electronic (PDF) versions of the completed security documents, together with a PDF copy of your account, to be delivered to BDC not later than 30 days after the date of your first request for disbursement of the loan. If all of the security documents have not been finalized within that time frame, the available documents should be sent to BDC, and additional documents delivered as they are available (e.g., State of Title Certificates, updated PPR registrations, surveys, insurance confirmation etc.). When there are multiple disbursements on a loan, an interim account should be issued to the Borrower, and a copy should be delivered to BDC together with the security package. We do not require delivery of subsequent disbursement accounts.
BDC does not require that you store either electronic or paper copies of our security documents beyond the time limits set by the applicable Law Society Rules in your jurisdiction.
Delivery to Legal Services
• Paper: the originals of only those security documents in the above list (see “Format” above), and any other document that must be tendered in paper format for enforcement purposes, to the following address:
Business Development Bank of Canada
Legal Services
121 King Street West, Suite 1200
Toronto, ON M5H 3T9
• Electronic – all security documents, including all reporting documents such as your Solicitor’s Report, your account and the covering letter for the security package, in PDF format (one document per PDF) to the following address:
legalcfsc@BDC.ca
o If you are instructed for multiple loans, send the security documents using a separate email for each loan multiple
o The subject line of your e-mail must include:
➢ Borrower’s name
➢ Account number and loan multiple (one per email)
➢ Instructing Business Centre or Department
• Electronic Files Naming – there no longer is a mandatory requirement to include the account or multiple number in the name of the document. There also is no longer a mandatory requirement for the use of abbreviations for the type of document. All security documents should be named using the following naming convention:
i. Type of document (e.g., GSA or General Security Agreement or any other version as long as the document type is easily identifiable to BDC)
ii. Only if there are multiple documents of the same type for the specific loan multiple (e.g., 2 GSA’s or 2 Guarantees), indicate the name of one of the parties to the document
• NOTE: Original Letter of Offer
BDC will sometimes proceed with a loan based on a faxed copy of the accepted Letter of Offer. If the S&D Officer advises you they have not received the original, please ensure that it is obtained and forwarded to the S&D Officer.
6 Your Account
You are to recover your fees and disbursements from the loan disbursements or directly from the borrower before releasing the final disbursement. Unless specifically otherwise approved, BDC will not pay your account. We require a copy of your account in all cases.
Loan Amendments
From time to time, amendments to our loans will require that supplemental security be prepared. We will send you an Instructing Letter enclosing the amendment requiring the supplemental security, as well as any other documents you may need to prepare the additional security.
In accordance with our reporting requirements in Section 7, we require electronic versions of the completed security documents and the Solicitor’s Report not later than 30 days after the security has been completed. Please indicate in the Solicitor’s Report which sections are not applicable to the completed security.
The outstanding balance of all loans being amended will be provided in the Instructing Letter. Where the total outstanding balance exceeds $5,000,000, you are expected to provide opinions as to capacity, authorization and execution for corporations and all non-corporate entities (partnerships, trusts, etc.) granting the supplemental security required by the loan amendment. Do not provide opinions for any other loan parties.
You are to recover your fees for all amendment work directly from the borrower or the borrower’s solicitor, as there will be no loan disbursement from BDC for amendments. You do not need to send a copy of your account for loan amendment work with your Solicitor’s Report.
PART II –Security Taking Topics – Atlantic and Ontario
Miscellaneous Topics
1 Multiple Jurisdictions
Where you are instructed to take security on a loan where there is security in more than one province we anticipate you will use local law firms as required but look to you to ensure the required security is taken. BDC will not instruct firms in each jurisdiction.
Where you are instructed to take security on a loan where a foreign corporation is giving security and a foreign opinion is required, we anticipate that you will use local law firms as required but look to you to ensure the required security is taken. BDC will not instruct a firm in the foreign jurisdiction. The exception to the foregoing is if BDC’s loan is to specifically finance a project in the U.S, in which case, we will require that specific U.S. counsel be used. If the loan falls into this category, the S&D Officer will advise you and provide you with the contact information for the U.S. counsel to be used.
2 Insurance on Assets
The Letter of Offer sets out the required insurance policies and terms thereof (if any). Although the borrower and corporate guarantors where indicated in the Letter of Offer are required to insure their assets for their full insurable value under the terms of the Letter of Offer, we do not require you to verify insurance is in place in all cases. You are required to verify insurance for all charged assets for loans over $500,000. For loans up to and including $500,000, you are only required to verify insurance for:
• Buildings;
• Aircraft; and
• Marine vessels.
You are required to verify insurance in accordance with this section for all loans even if we are relying on an existing mortgage or General Security Agreement for the new loan.
A certificate of insurance issued to BDC for each applicable type of insurance is required prior to the first disbursement. The name on the certificate(s) must match the name of the customer (or guarantor owning the secured assets). The address and descriptions of insured property(ies) must match the addresses and descriptions of assets pledged as security. The certificate(s) of insurance must include the following general information:
|Name of insured |Name of insurer |
|Type of policy |Description of insured property |
|Policy number |Policy term |
|Limit of coverage |Amount of deductible |
|Broker’s name/contact information | |
Forwarding Insurance Certificates
Please forward to the S&D Officer certificates or policies relating to aircraft or marine vessels as soon as possible. For all other types of insurance, a copy of the certificate of insurance must be included with delivery of the security documents and your report to Legal Services.
BDC’s requirements for the applicable types of insurance are as follows:
PROPERTY (building and equipment):
This insurance is required when BDC has taken realty, equipment and/or business inventory as security. Coverage must include:
• Building and equipment insured on an “All Risks or Broad Form”, full “Replacement Cost” basis
• BDC included as Mortgagee as its interests may appear
• “Standard Mortgage Clause (Approved by the Insurance Bureau of Canada)” in favour of BDC for all realty (buildings)
• BDC included as Loss Payee for equipment/contents as its interests may appear
• 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only “endeavour to provide”
Note: Condominiums – Insurance should be confirmed both for the building policy held by the condominium corporation and for the owner’s policy covering the unit contents. BDC is only required to be named as loss payee on the owner’s policy. The Loss Payee and Standard Mortgage clause are not required on the condominium corporation policy.
PROPERTY (building and equipment) located outside of Canada
BDC’s Operational Risk Management (“ORM”) Department is responsible for verifying the Insurance coverage on secured property located outside of Canada. Please forward Certificates of insurance to BDC’s S&D Officer for review by the ORM Department as soon as possible.
EQUIPMENT BREAKDOWN (Boiler & Machinery):
This insurance is required when a building pledged as security has pressure vessels for heating and/or other process machinery and equipment. Coverage must include:
• Standard Comprehensive All-Risks or Broad Form, Repair or Replacement Cost basis
• BDC included as Loss Payee as its interests may appear
• 30 days prior notice of cancellation clause in favour of BDC
BUILDERS’ RISK OR COURSE OF CONSTRUCTION:
This insurance is required to cover loss or damage to buildings while they are under construction for construction loans. The construction contract should specify which party is responsible for procuring the insurance; it can be the future owner of the completed building, the project manager or the general contractor. Coverage must include:
• Building and equipment insured on an All Risks or Broad Form, Replacement Cost basis, including coverage for Soft Costs
• BDC included as Mortgagee as its interests may appear
• Standard Mortgage Clause (approved by the Insurance Bureau of Canada) in favour of BDC for all realty (buildings)
• BDC included as Loss Payee for equipment/contents as its interests may appear
• 30 days prior notice of cancellation clause in favour of BDC
Note: The amount of insurance should reflect the construction costs as well as the soft costs such as architectural and engineering fees. Evidence of property insurance is required once construction has been completed.
TRANSPORTATION RISK (CARGO):
This insurance covers loss or damage to property while in the course of transportation and is required when BDC calls for a charge on equipment and the amount disbursed on equipment in transit will exceed $500,000. Coverage must include:
• Property transported and insured on an All Risks, Replacement Cost basis, including loading or unloading, covering any and all modes of transport used
• BDC as Loss Payee as its interest may appear
• 30 days prior notice of cancellation clause in favour of BDC (not relevant if the coverage is arranged for a single voyage or trip and is imminent)
MARINE:
This insurance is required when a marine vessel is pledged as security. A copy of the certificate of insurance must be provided to the S&D Officer for forwarding to our ORM Department – Insurance for review prior to disbursement. Coverage must include:
• Marine vessels insured for full value of the vessel under a Standard Hull & Machinery insurance clause in customary use for the occupation of the vessel
• BDC included as Loss Payee as its interests may appear
• Mortgagee Interest Clause in favour of BDC (required for vessels with a Current Liquidation Value (CLV) ≥ $500,000). The S&D Officer can advise you as to the CLV)
• Protection & Indemnity (third party liability) coverage in the minimum amounts of:
o $1,000,000 for pleasure craft
o $2,000,000 for commercial use
o or as required by Transport Canada or as specified in the Letter of Offer
• BDC included as an Additional Insured (should be requested but may not be available if the vessel insured through a P&I - protection & indemnity club)
• 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only “endeavour to provide”
AVIATION:
This insurance is required when an aircraft is pledged as security. A copy of the certificate of insurance must be provided to the S&D Officer for forwarding to our ORM Department – Insurance for review prior to disbursement. Coverage must include:
• Aircraft hull insured on an “All Risks” basis for the full value of the aircraft
• Hull War Risk and Related Perils (required if aircraft operated outside Canada/USA)
• Insurance to include “In-Flight” coverage
• Third Party Liability (including passenger) coverage in the minimum amounts of: (refer to Aircraft Schedule B – General Security Agreement):
o $1,000,000 for private aircraft
o $2,000,000 for commercial use plus $1,000,000 per passenger
o or as required by Transport Canada or as specified in the Letter of Offer
• BDC included as an Additional Insured (should always be requested but may not always be available for small private aircraft)
• Breach of Warranty clause in favour of BDC
• BDC included as Loss Payee as its interests may appear
• 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only “endeavour to provide”
• BDC will accept AVN67C or AVN28B or equivalent
Note: Breach of Warranty clause provides protection to BDC similar to the Standard Mortgage Clause in Property insurance. AVN67C and AVN28B are endorsements available in the London market for leased/financed aircraft. AVN67C is used for Airline operations while AVN28B applies to commercial general aviation risks. They include the Loss Payee, Breach of Warranty, and cancellation clauses. AVN67C also includes Additional Insured clause for financiers. If aircraft is grounded, coverage must include liability insurance for ground risk. This is referred to as Static Liability.
AVIATION GENERAL LIABILITY:
Clients that operate aircraft hangars that provide fuelling, maintenance and/or repair services to third parties must provide evidence of this insurance. Coverage must include:
• $1,000,000 limit of Hanger Keepers liability per occurrence or the maximum value of aircraft in the hangar at any one time
• Aviation Products Liability in the minimum amount of $1,000,000 per occurrence and in the annual aggregate
• BDC included as an Additional Insured
• 30 days prior notice of cancellation clause in favour of BDC
MOTOR VEHICLES:
This insurance is required when motor vehicles are pledged as security. Coverage must include:
• “All Risks” physical damage or “Collision and Comprehensive” coverage
• Automobile liability in the minimum amount of $1,000,000 per occurrence
• Lien Holder Endorsement naming BDC as Loss Payee (should be requested but may not always be available – e.g., government owned car insurance entities will not typically provide this)
• 30 days prior notice of cancellation clause in favour of BDC. The clause is acceptable even if only “endeavour to provide”
3 Insurance Confirmation Checklist
The S&D Officer gives the borrower an Insurance Confirmation Checklist which the borrower can take to his insurers to simplify placing insurance. This checklist will normally not come to you but if it does, it should not be considered as a change in instructions. The insurance called for in the Insurance Confirmation Checklist should be the same as in the Letter of Offer as amended, but in the event there is a difference, we expect you to meet the requirements of the Letter of Offer rather than the Insurance Confirmation Checklist.
5 Life Insurance
When life insurance is required, we require that you arrange for the execution of a notice of assignment form, and the registration of same with the Insurer. The Insurer's form may be used provided it does not contain unreasonable restrictions.
6 Prior Permitted Charges on Land or Personal Property
You are expected to conduct priority searches and confirm the priority of registration of the charge. Where we permit a prior charge up to a dollar amount, we require you to satisfy yourself and confirm to us that the prior charges do not and cannot in the future exceed the permitted amounts (except for interest and costs of enforcement). A priority agreement to restrict the priority of future advances may be required. If your searches reveal the following types of charges that are not specifically permitted by the security description in the Letter of Offer, they are to be treated as follows:
|REAL PROPERTY |
|Charge |Treatment |
|Utility easements or rights-of-way to utility companies (hydro, |No action required |
|telephone, sewer or governments, etc.) | |
|Under surface mineral rights in the crown or third parties | |
|Private easements or rights-of-way for access to adjoining lot, | |
|encroachments, etc. |Charge to be postponed or loan amendment permitting priority |
|Buy-back/resolutory charges in favour of municipalities, developers or | |
|others | |
|Governmental restriction on use of property not arising from dealings |Solicitor is to advise, in writing (letter or e-mail), to the S&D |
|with the property owner (e.g. flood plain agreement, height restriction) |Officer as to nature and effect of the charge and advise if it |
| |does or does not unreasonably affect the use or saleability of the|
| |property. If it does not, nothing further is required. If it |
| |does, commentary as to the effect is to be provided so that the |
| |BDC can assess and, if approved, prepare a loan amendment. |
|Governmental building approval – restricts use to particular construction| |
|may require posting of bonds, construction target dates, penalties | |
|Developer’s building restrictions | |
|Other covenants and restrictions | |
|Leases of land or buildings |Lease to be postponed/discharged or loan amendment permitting |
| |priority |
|Non-disturbance agreement |Authorization required by loan amendment |
|PERSONAL PROPERTY |
|Charge |Treatment |
|Other charges only on inventory and/or receivables where we have |No action required except if our loan is a sub-debt loan in which |
|already allowed priority to operating lender |case loan amendment required to permit |
|Leases and conditional sales agreements of specific equipment |Solicitor is to provide list of leased/sold equipment for sign-off |
| |by Field Management level of authority |
|Other charges on vehicles only |Solicitor is to provide list of leased/sold equipment for sign-off |
| |by Field Management level of authority |
|Other charges on specific equipment or other personal property |Charge to be postponed/discharged or loan amendment permitting |
| |priority |
|Other general charges by Hypothec or GSA on a class of assets or all | |
|movables/personal property | |
|Judgements, governmental or other liens and writs of execution | |
|registered in PPR | |
8 Searches
We require you to make all necessary searches to establish the priority of registration of our security. Ownership searches of charged vehicles should be made where possible. For searches not specifically identified on the following chart, we expect you will perform such other searches as may be necessary based on the standards of practice in your area.
|SEARCH |REQUIRED | |SEARCH |REQUIRED |
|PPR/PPSA |when personal property | |Employment Standards (wages) |No |
| |charged | | | |
|LTO/LRO |when real property | |Bank Act |where nature of business indicates|
| |interest charged | | |and we have not subordinated our |
| | | | |position on inventory |
|Real Property Tax |when land charged | |Zoning |No |
|Company Office |yes | |Revenue Canada |No |
|Worker’s Compensation |no | |Actions / judgments |No |
|SST/Sales Tax |no | |Condominium fees |where lot charged |
| | | |Aircraft registration with |where aircraft charged |
| | | |Transport Canada | |
|Executions |when land charged | |Certificate of air worthiness |Yes |
| | | |International Aircraft Registry |where applicable |
|Manufactured Home Registry |as applicable | |Municipal by-law search |No |
|Canada Shipping |as applicable | |Bankruptcy |No |
NOTE: In any particular case you feel it would be wise to effect a non-mandatory search due to the particular facts of the file please discuss that with the S&D Officer.
vii) Landlord’s Undertakings and Waivers of Distraint
We expect you to attend to obtain BDC’s standard form of waiver or undertaking as may be called for in the Letter of Offer. Some lessors however, such as federal and provincial departments and their agencies, crown corporations, some large shopping centres and corporations such as C.P. Rail have their own forms and the S&D Officer will require your assistance in assessing its suitability.
viii) Loans to Corporations to be Incorporated (TBI’s)
In many cases, the only document signed by the borrower that contains the terms of a particular loan is the Letter of Offer. Where a corporation, intended to be a borrower, does not exist at the time the Letter of Offer is accepted, we require a subsequent written adoption of the Letter of Offer from that corporation and its acceptance of the terms of the loan.
ix) Share Purchases
In many cases, the target corporation is to be a borrower or guarantor under a loan providing funds to buy the shares of that corporation. In the event the Letter of Offer has not been signed by the company under its incumbent officers, then you must ensure that it is adopted and confirmed by the corporation by the authorized signatories at closing.
x) Alberta Guarantee Acknowledgement Act
In Alberta, the Guarantee Acknowledgment Act requires all individual guarantors executing a written guarantee to appear before a lawyer to acknowledge their execution of the guarantee on the form prescribed by the Guarantee Acknowledgment Act Forms Regulation. You are required to obtain signed Guarantee Acknowledgment Act forms from all individuals giving a guarantee that is (1) executed in connection with a loan originating in Alberta or (2) executed by Alberta residents regardless of jurisdiction of loan origination.
xi) Pari Passu and Asymmetric Co-Lending
BDC has two different co-lending solutions, each of which involves a different form of agreement between BDC and the co-lender. The first is traditional pari passu (in which BDC takes on the same risk as its co-lender and a Pari Passu Agreement is used) and the second is asymmetric lending (in which BDC takes on more risk than the co-lender and an Intercreditor Agreement (Asymmetric Lending) is used). The letter of offer will identify which agreement is required. Both forms are available at bdc.ca/forms with the other BDC security forms.
xii) Purchase Money Security Interest (PMSI)
Unless specifically authorized and approved on a particular loan, BDC does not rely on PMSI financing for security purposes. Accordingly, when financing personal property we require that you confirm our priority through registrations and, where necessary, duly executed priority agreements or waivers.
xiii) Buyback Provisions/Development Agreements/Development Restrictions
Often municipalities and land developers impose obligations on our loan parties that allow for the repurchase of realty if conditions related to a proposed development are not satisfied. Unless specifically authorized and approved on a particular loan, these buy-back provisions should be deleted, subordinated to BDC’s security, or otherwise resolved through an agreement approved by BDC’s internal Legal Services. Due to the difficulty and time required in negotiating the removal or subordination of these clauses, we ask that you advise the S&D Officer as early as possible of their existence. At that time you should also provide a summary of the clause and a recommended course of action.
MORTGAGES OF LAND
Taxes
Where an interest in land is mortgaged, realty taxes up to the end of the previous year and all current year’s taxes which have been billed and are due as of the date of the initial disbursement must be paid prior to initial disbursement.
If the loan is being disbursed in stages over the current year, the taxes for the current year must be paid proportionally to the date of the final disbursement or at least to ascertain that the current taxes are paid in accordance to the schedules allowed by the municipalities if the last disbursement occurs after these schedules.
We will rely on you to this end and do not require further documentation or certificates. Please provide confirmation in your solicitor’s report.
Readvanceable Mortgages
There is no special form for a “readvanceable” mortgage. The BDC’s regular mortgage is a “readvanceable mortgage”. In Ontario, the Schedule “A” and the filed Standard Charge Terms no. 20011 cover the issues raised by the “readvanceable” mortgage. In Newfoundland, Nova Scotia and P.E.I., all readvanceable provisions are contained in the BDC’s standard mortgage document. In New Brunswick, Optional Mortgage Covenant # BDBC- 538 addresses the issues raised by the “readvanceable” mortgage.
The readvanceable mortgage is intended to benefit borrowers by enabling the BDC to avoid reproducing the mortgage security in the event of future loans. However, there is no obligation on the BDC to make further loans to the borrower.
Existing Readvanceable Mortgages
If the BDC already holds a readvanceable mortgage for an existing loan, the security section in the Letter of Offer for the new loan may state: “Existing first readvanceable mortgage in the principal amount of $_______ will stand as security for this loan.”
• We expect that you will review the existing mortgage, and amend or replace it only if necessary by reason of some apparent error or deficiency in its preparation, execution or registration, or if necessary to add additional properties. In particular, please review the existing mortgage and ensure that the total outstanding commitment by the BDC (balance outstanding on any prior loan accounts secured by the existing mortgage plus the total amount of the new loan) does not exceed the principal amount stated on the existing mortgage. The total commitment amount can be obtained from the S&D Officer.
In some cases old form or irregular mortgages may have been used after introduction of the readvanceable form. The existing mortgage must be examined in all cases.
• We expect that you will perform the necessary subsearch of title, obtain a clear execution certificate, and obtain evidence of payment of realty taxes. If the mortgaged property is a condominium, a new status/estoppel certificate is required, unless there is an existing lender’s policy issued by First Canadian Title, Stewart Title or Chicago Title from the time of registration of the existing mortgage.
• We expect that you will verify that insurance is in place in accordance with the Insurance on Assets section of these Service Standards.
• Where a mortgage to another lender has been registered subsequent to our existing mortgage and prior to our supplementary loan for which you have been instructed, we will rely on your advice as to the priority of our new advance and as to whether we require a registered postponement or a priority agreement from the intervening lender to achieve the desired priority position.
• Refer to the mortgage in your report – You will not be responsible for any defects in preparation, execution or registration that are not patent. Any that are, should be addressed.
Existing Readvanceable Mortgages – Survey Review
If the survey submitted at the time of the registration of the existing readvanceable mortgage is more than 10 years old at the time of the new loan, or if there has been an alteration, addition or demolition to the structure(s) shown on the survey, or if there is an existing lender’s title insurance policy issued by an insurer other than First Canadian Title, Stewart Title or Chicago Title, then we will require either a new survey, or a new lender’s title insurance policy. If there is an existing lender’s title insurance policy in favour of BDC issued by First Canadian Title, Stewart Title or Chicago Title for the existing readvanceable mortgage, a new title insurance policy is not required (see section “Surveys and Title Insurance” below in this Service Standards document).
Mortgage Not on Demand
While our mortgages may contain language such as “on demand”, they are not demand loans. As is further provided in each mortgage, the Letter of Offer governs each loan and default is required before a loan will be called.
Capped Mortgages
When BDC expects to make a further loan to the Borrower, BDC may wish to take a “capped” mortgage which states a higher principal amount than that set out in the Letter of Offer. The actual principal amount for the new loan is governed by the Letter of Offer.
If BDC has called for a “capped” mortgage, the amount of the “cap” or stated amount of the mortgage will be expressed in the Letter of Offer as follows:
“First readvanceable mortgage in the principal amount of $________. “ This amount will be greater than the loan amount.
If there is no principal amount stated for the mortgage in the security section of the Letter of Offer, you can conclude that the BDC is taking a “regular” mortgage where the amount of the mortgage and the loan amount are the same.
The capped mortgage is intended to benefit Borrowers by enabling BDC to avoid reproducing the mortgage security in the event of future loans. However, there is no obligation on BDC to make further loans to the Borrower.
There is no special form for a capped mortgage.
For Newfoundland only, please attach an affidavit stating the amount of the actual advance. This should result in the recording costs being based on the amount of the advance, not the “capped” amount.
Mortgage of Lease
For the mortgaging of a leasehold interest in land, a copy of the lease must be provided, as well as the landlord’s consent, in writing, to the mortgage (if required by the lease). The BDC does not provide a leasehold consent form and accordingly, this must be drafted by you.
i. Ontario
There is no separate form for leasehold mortgages. Use the statutory form for the Charge/Mortgage of Land with the filed Standard Charge Terms.
ii. Atlantic Canada
There is no separate form for leasehold mortgages. The standard mortgage can be used to charge freehold as well as leasehold.
Ontario Mortgage Forms
i. Mortgages in Electronic Format
The following special instructions are to be used for electronic mortgages in those jurisdictions where electronic registration is in place.
Attach the BDC’s Schedule “A” (MTG-ONT-Readvanceable (E-REG)). An electronic version of the Schedule (Mortgage Schedule A (oct01).pdf) may be obtained from the Teranet web site.
Insert the appropriate number for the BDC’s Standard Charge Terms filed in Ontario - S.C.T. no. 20011. Do not attach a schedule for the repayment terms. There should be no guarantor for the BDC’s mortgage, even if the Letter of Offer calls for a guarantor of the loan.
Reporting requirements: please provide an electronic version of the original signed Acknowledgment and Direction addressed to the BDC.
Please complete the “Payment Provisions” fields of the electronic Charge as follows:
Principal Amount - enter the principal amount of the loan, or for a mortgage collateral to a guarantee, enter the amount of the guarantee.
Payments – delete all of the figures so the field is blank in the registered Charge.
Interest Rate - enter “Schedule A”
NOTE: RE: INTEREST RATE: The mortgage is intended to secure all present and future liabilities and indebtedness of the borrower. In order to provide protection for the BDC in the event of an increase in interest rates payable under the various debt instruments, we require that the Interest Rate on the mortgage (refer to Schedule A) be shown as the BDC’s floating interest rate plus 10%. Although we are secured for a higher interest rate, we are entitled only to interest as determined by the rate in the Letter of Offer, or any other evidence of indebtedness which the borrower may have entered into with the BDC at any particular point in time.
Insurance - enter “see Standard Charge Terms”.
For all other fields, enter “Schedule A” where appropriate.
An electronic assignment of rents is also available from the Teranet web site.
ii. Mortgages in Paper Format
Use the applicable statutory mortgage form (in Ontario - Charge/Mortgage of Land) and attach the BDC’s Schedule “A” (i.e. MTG-ONT). Also, insert the appropriate number for the BDC’s Standard Charge Terms filed in Ontario - S.C.T. no. 20011. Do not attach a schedule for the repayment terms.
Please complete the “Payment Provisions” box (9) of the statutory Charge/Mortgage form as follows:
Box (a) Principal Amount - enter the principal amount of the loan, or for a mortgage collateral to a guarantee, enter the amount of the guarantee, or where the Letter of Offer specifies the amount of the mortgage, enter the specified mortgage amount.
Box (b) Interest Rate - enter “see Schedule A”.
Box (c) Calculation period - enter “see Schedule A”.
Box (e) Payment Date and Period - enter “On Demand”
NOTE: Although we would prefer to leave this box blank, we are not permitted to do so by the Land Registrar, who will only accept the mortgage for registration if that box is completed. Our choice would be to either fill in the actual dates, or fill in the words, "On Demand". Since it is preferable to keep our options open regarding payment dates to allow the BDC and the borrower the flexibility of changing payment dates during the administration of the loan, we ask our solicitors to insert the words, "On Demand." While this form requires a “demand” feature, it does not make our loans “demand loans”. Each loan is governed by its Letter of Offer and default is required before a loan will be called.
Box (j) Insurance - enter “see Standard Charge Terms”.
For all other boxes of the “Payment Provisions”, enter “xxx” to delete.
Atlantic Mortgage Forms
There are two different mortgage forms; a readvanceable mortgage for the principal indebtedness (the loan amount) and a readvanceable mortgage collateral to the guarantee. Both of our mortgage forms are readvanceable. For collateral mortgages, as our form is now readvanceable, do not attach the guarantee as a schedule to the registered mortgage.
Please ensure that whether using the readvanceable mortgage (taken as security from a Borrower) or the collateral readvanceable mortgage (taken as security from a Guarantor), that the amount of the registered mortgage reflects the amount required for the mortgage in the Security section of the Letter of Offer. If no amount is indicated for the mortgage in the Letter of Offer, then the registered amount must be equal to the amount of the Loan which calls for the new mortgage. The amount of the registered mortgage should not be reduced based on the percentage amount of the guarantee.
In order to provide protection for BDC in the event of an increase in interest rates payable under the various debt instruments, the interest rate on the Mortgage is shown as BDC’s floating interest rate plus 10%. Although we are secured for a higher interest rate, we are entitled only to interest as determined by the rate in the Letter of Offer, or any other evidence of indebtedness which the Borrower may have entered into with BDC at any particular point in time.
In New Brunswick, the readvanceable mortgage form from a Borrower includes Optional Mortgage Covenants filed as BDBC-538 (BDBC-2424 in French), which should always be used. There are also optional covenants for an Assignment of Rents filed as BDBC-483 (BDBC-2423 in French), which should be included if BDC has called for an Assignment of Rents from a Borrower as part of our security. The collateral readvanceable mortgage from a Guarantor in New Brunswick includes Optional Mortgage Covenants filed as BDBC-2360 (BDBC-2372 in French), which should always be used. There are also optional covenants for an Assignment of Rents filed as BDBC-4015 (BDBC-4016 in French), which should be included if BDC has called for an Assignment of Rents as part of our security where a collateral mortgage was granted by a Guarantor. There is no separate Assignment of Rents form to be signed by a Borrower or Guarantor in NB.
Condominiums
If we are taking a mortgage on a condominium in Ontario, we require a status certificate to confirm that all condominium fees are paid to date. In Atlantic Canada, we require an estoppel certificate to confirm that all condominium fees are paid to date. Alternatively, title insurance may be obtained in lieu of a status/estoppel certificate.
Parking - please advise the S&D Officer, in writing, regarding the Borrower’s interest, if any, in parking facilities. If the Borrower has acquired an interest in parking which can be mortgaged, the S&D Officer may want to take a charge on that interest.
Holdbacks for Construction Loans
BDC normally retains holdbacks from its disbursements on construction loans in Ontario until 45 days after publication of a certificate of substantial completion in accordance with the Construction Lien Act. However, strictly as a matter of BDC policy, BDC does not retain holdbacks on construction projects of $500,000 or less (cost of the construction project component). BDC no longer retains holdbacks from its disbursements on construction loans in New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island.
Surveys and Title Insurance
You are to obtain and review a building location survey/ location certificate (in NF, a Surveyor’s Real Property Report) or obtain title insurance where we call for a mortgage on land and buildings. BDC is prepared to accept an existing survey provided that it is no more than 10 years old at the time of the financing and shows all existing buildings (including additions) on the property. If the survey is less than 10 years old, a statutory declaration from the owner stating that that there have been no alterations, additions, or demolitions to the buildings or structures as shown on the plan since the date of the survey should accompany the survey. However, if the survey is either more than 10 years old at the time of the financing or less than 10 years old but does not show all existing structures, then either a new survey or title insurance is required.
Title insurance is mandatory for construction loans in Ontario where the project is equal to or greater than $1 million. For construction loans in Atlantic Canada (for any amount) or in Ontario for projects of less than $1 million, we require either title insurance prior to the first disbursement or a survey once the foundation is in place, which survey must be updated before the last disbursement to confirm no above ground hanging encroachments
For non-construction loans, survey requirements must be fulfilled prior to first disbursement of the loan.
Exceptions
• For some rural properties over 5 acres, the S&D Officer may accept a sketch plan drawn to scale by the account officer or the borrower.
• Surveys are not required for registered condominium or strata lots, unless there is a bare land condominium or strata plan.
• Surveys or title insurance are not required for vacant land unless BDC is financing a construction project, in which case the instructions herein relating to construction loans are applicable.
Title Insurance
• Where a survey/location certificate or status/estoppel certificate is required, title insurance from First Canadian Title Insurance Company or Stewart Title Guaranty Company or Chicago Title Insurance Company may be used instead at the borrower’s option and cost.
• Please note that BDC does not accept title insurance in lieu of off-title searches, other than defects disclosed by a building location survey.
• Title insurance may be available to protect against known title defects such as encroachments and BDC may be willing to accept this in a particular fact situation.
• Please advise the S&D Officer in writing providing details of the title problem together with your opinion that the problem can be appropriately covered by title insurance and further written instructions will be provided. In any case where title insurance is used, we will expect you to be satisfied that the policy obtained covers the risk(s) to be insured (survey, known defects).
• In all cases, should BDC be prepared to accept title insurance, we require that the policy be issued through First Canadian Title, Stewart Title or Chicago Title with BDC as the insured, for the amount of the mortgage and for a term equivalent to the life of the loan. BDC will only accept title insurance issued through First Canadian Title, Stewart Title or Chicago Title, as they provide a special readvanceable endorsement for BDC mortgages (see section below re: Subsequent Advances). Please do not request that another insurer provide the coverage.
• CONSTRUCTION LOANS: Should the loan include a construction component, First Canadian Title, Stewart Title or Chicago Title must be notified so the appropriate construction endorsement can be added to the policy when it is issued. Title insurance is mandatory for all construction loans in Ontario where the project is equal to or greater than $1 million.
First Canadian Title Insurance for Subsequent Advances
The Subsequent Loan Facilities Endorsement (see Schedule A for 04/10 revision – confirm with First Canadian that you have the current version) is deemed included in First Canadian Title Insurance when a new or existing readvanceable BDC mortgage form is used on an insured loan. Therefore, if making a supplementary loan relying on an existing readvanceable mortgage for which a First Canadian Title Insurance Company policy had been obtained as to an earlier loan, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:
1. Where the total amount of the new loan and existing loan(s) are less than the existing policy amount:
a. no notice to First Canadian required;
b. you must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. No confirmation of these searches, etc. is sent to First Canadian but must be retained on your file.
2. Where the total amount of new loan and existing loan(s) are greater than the existing policy amount:
a. First Canadian is to be advised as to:
• borrower;
• policy number;
• new insured amount (total amount of loans);
• date of advance of new monies
b. An additional fee will be required based on the difference between the cost of a new policy for the existing insured amount and a new policy for the new insured amount;
c. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to First Canadian as for a new policy;
d. First Canadian will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.
Stewart Title Insurance for Subsequent Advances
The Subsequent Loan Facilities Endorsement (Special) 05/06/2008 revision (see Schedule B – confirm with Stewart Title that you have the current version) is deemed included in Stewart Title Insurance when a new or existing readvanceable BDC mortgage form is used on an insured loan. Therefore, if making a supplementary loan relying on an existing readvanceable mortgage for which a Stewart Title Insurance policy had been obtained as to an earlier loan, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:
1. Where the total amount of the new loan and existing loan(s) are less than the existing policy amount:
a. no notice to Stewart Title required;
b. you must follow the requirements of the Subsequent Loan Facilities Endorsement (Special) as to sub searches, prior charges and payment of taxes. No confirmation of these searches, etc. is sent to Stewart Title but must be retained on your file.
2. Where the total amount of new loan and existing loan(s) are greater than the existing policy amount:
a. Stewart Title is to be advised as to:
• borrower;
• policy number;
• new insured amount (total amount of loans);
• date of advance of new monies
b. An additional fee will be required based on the difference between the cost of a new policy for the existing insured amount and a new policy for the new insured amount;
c. You must follow the requirements of the Subsequent Loan Facilities Endorsement (Special) as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to Stewart Title as for a new policy;
d. Stewart Title will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.
Chicago Title Insurance for Subsequent Advances
The Subsequent Loan Facilities Endorsement (see Schedule C – confirm with Chicago Title that you have the current version) is deemed included in Chicago Title Insurance when a new or existing readvanceable BDC mortgage form is used on an insured loan. Therefore, if making a supplementary loan relying on an existing readvanceable mortgage for which a Chicago Title Insurance policy had been obtained as to an earlier loan, that policy can be used for the new loan although some modification and additional fee is required in some cases as follows:
1. Where the total amount of the new loan and existing loan(s) are less than the existing policy amount:
a. no notice to Chicago Title required;
b. you must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. No confirmation of these searches, etc. is sent to Chicago Title but must be retained on your file.
2. Where the total amount of new loan and existing loan(s) are greater than the existing policy amount:
a. Chicago Title is to be advised as to:
• borrower;
• policy number;
• new insured amount (total amount of loans);
• date of advance of new monies
b. An additional fee will be required based on the difference between the cost of a new policy for the existing insured amount and a new policy for the new insured amount;
c. You must follow the requirements of the Subsequent Loan Facilities Endorsement as to sub searches, prior charges and payment of taxes. Confirmation of these searches, etc. is sent to Chicago Title as for a new policy;
d. Chicago Title will issue an amended policy where the amount of insurance will be increased and the date of policy brought forward.
Prior Inactive BDC Mortgages
Where you are instructed to register a mortgage on behalf of BDC and there are prior inactive mortgages registered on behalf of BDC, please submit draft discharges of the inactive mortgages to BDC with your security package. You should confirm with the borrower/its solicitor whether they will register the discharges or whether they wish to have you register them. Where a prior BDC mortgage is being superseded by the new mortgage you are registering, BDC Legal will not sign the discharge until after we have received your reporting on the new mortgage so you should advise the borrower/its counsel that the discharge will not be available until after closing. If you will be registering the discharges, you must ensure that you have retained funds in trust to cover your costs. Only BDC Legal can sign discharges on behalf of the bank – do not ask the S&D Analyst or BDC Account Manager to sign the Acknowledgment and Direction.
Personal Property Security
Registration – Personal Property Security Act
Duration
As a general matter, financing statements are to be filed for a period equal to the “Maturity Date” of the loan plus five years. Where this results in a registration period that would require an “infinity” or “perpetual” registration, please do not register for infinity but instead register for the maximum fixed term (usually 25 years) and then immediately extend the registration for the required number of years. This avoids the heavy cost of an infinity or perpetual registration.
Execution
Your firm is authorized to execute Financing Statements and Financing Change Statements on behalf of BDC.
Reporting
Please provide with your Solicitor’s Report the registered Financing Statement (Ontario) and the Verification Statement (Ontario and Atlantic provinces).
Atlantic
It is not necessary to use a secured party code to effect a filing under the PPR. While BDC used to provide a code number in New Brunswick, this practice has been discontinued.
The collateral is to be described as: “All present and after acquired personal property.” In addition, please ensure that any serial numbered goods (motor vehicles, trailers, aeroplanes etc.) are specifically described in the financing statement. Please review the definition of serial numbered goods under your legislation.
Equipment Lists
Equipment lists are generally provided by the S&D Officer and attached to the GSA. If no list has been made available, confirm with the S&D Officer that the list has been waived. If the list is provided directly by the borrower, please ensure that the list has the S&D Officer’s approval.
Fixture Filings
We rely on you to determine whether fixture filings in Land Titles/Registry Offices are necessary.
Assignments of Shareholder’s Loans and Guarantees
We do not require the registration of any financing statements in respect to assignments/postponements of shareholder’s loans or guarantees.
General Security Agreement (GSA)
GSA Form
Our GSA is intended to be unlimited in amount and to secure any number of loans. It is designed to provide an all present and after acquired personal property charge. We also have instructions in the “Tip Sheet” for the GSA form to create a Specific GSA for the rare cases where we call for a charge on specific chattels only.
Joint GSA
One separate GSA is to be taken for each person or entity required to give one. This simplifies using the GSA to secure other indebtedness, discharging individual borrowers and may ultimately save the client money.
Supplementary or Superseding Loans relying on Existing GSAs
When you are instructed for a loan where an existing GSA is to be used we expect you to:
• Review a copy of the existing GSA and any existing priority agreements – please obtain copies from the S&D Officer if not already sent;
• Examine the GSA for patent defects (e.g., errors or omissions in completion or execution);
• Do searches to determine proper registration and no unauthorized registered prior charges based on the priority required for the GSA in the new Letter of Offer. Search requirements in 7 above apply;
• Add serial numbered good(s) forming part of BDC’s first position security, if required;
• Extend registration period as required;
• Verify that insurance is in place in accordance with the Insurance on Assets section of these Service Standards;
• Refer to the GSA in your report – You will not be responsible for any defects in preparation, execution or registration that are not patent. Any that are should be addressed; and
• Confirm priority of registration in your Solicitor’s Report based on the security requirements in the new Letter of Offer.
Charges on Rolling Stock/Railway Equipment
Where BDC is taking security over rolling stock as defined under the Canada Transportation Act, we will expect filing of our security agreement under that Act through the registry maintained by Industry Canada as well as the appropriate provincial security registry filings. You are not expected to automatically complete the federal filing when only a GSA is called for. If you think it is warranted in any case, please discuss that with the S&D Officer.
Intellectual Property
We have created a number of special security forms for use when requested, being:
Assignment of Copyright Assignment of Trademarks
Assignment of Patents Source Code Hypothecation
Where one of these forms is called for, we will expect filing of a notice of our GSA interest (not the assignment or hypothecation) against the interest’s registration in the applicable federal registry as well as the appropriate provincial security registry filings. You are not expected to automatically do the federal filings when only a GSA is called for. If you think it is warranted in any case, please discuss that with the S&D Officer.
Charges on Aircraft at The International Registry for International Interests in Mobile Equipment (Aircraft Equipment) (International Registry)
As of April 1, 2013, Canada implemented the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol to the Convention. As a result, BDC is now required to register at the International Registry established under the Convention, an international security interest (known as an “international interest” under the Convention) when financing airplanes and helicopters of a defined size and airplane engines of a defined thrust capacity or horsepower (known as “aircraft objects" under the Convention).
The Letter of Offer will set out BDC’s security requirements with respect to the Aircraft and will indicate where our security interest should be registered, including reference to the International Registry, if applicable. Such security requirements will include a security interest and international interest in the aircraft and engine(s) and may include an assignment of any lease agreement with respect to the aircraft. You are expected to confirm whether the aircraft qualifies for registration in the International Registry. A loan amendment will be required if BDC has called for an International Registration and you have determined that such is not necessary, or vice versa. We expect you to advise the S&D Officer if this is the case.
The security documents for aircraft financing are included with BDC’s other security documentation available on the Internet - bdc.ca/forms. Note that there is a separate form of GSA and schedules required for aircraft. The aircraft GSA and schedules are to be used regardless of whether the aircraft will be registered in the International Registry or solely in the Personal Property Registry, and the schedules must be reviewed and completed. A new GSA must be signed for all aircraft objects that are to be registered in the International Registry after April 1, 2013. The new forms also include an Assignment of Aircraft Lease Agreement and a Consent & Acknowledgment re Assignment of Aircraft Lease for circumstances where an aircraft is subject to a lease permitted by BDC.
Where applicable, searches should be conducted in the International Registry and registrations performed. You are also required to register in the applicable Personal Property Registries. If you are not provided sufficient particulars to enable you to perform the necessary searches and registration, please request such information from the S&D Officer.
You are responsible to confirm full satisfaction of all Conditions Precedents listed in the Letter of Offer, including the requirement that the borrower and any permitted lessee of the aircraft be registered as Transacting User Entities in the International Registry. If you or another individual at your firm is registered as a Professional User Entity under the Convention, you may (a) act for both BDC and the borrower as permitted by these Service Standards; and (b) act as agent for the borrower for International Registry purposes, even if you are not counsel for the borrower.
If you or another individual at your firm is registered as a Professional User Entity under the Convention, you may also prepare all required security documents and complete all necessary provincial and international registrations on behalf of BDC. You will need to obtain authorization from BDC’s IR Administrator (see below) to complete the international registrations.
If you or another individual at your firm is not registered as a Professional User Entity under the Convention you may prepare all required security documents and complete all necessary provincial registrations on behalf of BDC. However, if any international registrations are required you must retain the services of BDC’s IR Administrator (see below) to complete those registrations. You will be required to provide our IR Administrator copies of the signed security documents when requesting an international registration.
BDC’s IR Administrator is the Calgary law firm of Parlee McLaws LLP. Please direct any inquiries to:
Robyn Jeffrey
Commercial and Banking & Finance Paralegal
IR@
Parlee McLaws LLP
Barristers & Solicitors, Patent & TradeMark Agents
3300 TD Canada Trust Tower, 421-7th Avenue SW
Calgary, Alberta T2P 4K9
Direct dial: (403) 294-7011
Fax: (403) 265-8263
Web site:
Dale Spackman Q.C. and Rhea Shelton of that firm are the backup contacts.
Security over Fishing Licences and Marine Mortgages
Where BDC is taking security over fishing licences, there is a special form of schedule which you must complete and attach to our standard GSA. In Atlantic Canada, you are also expected to complete a Notice of Financial Arrangement in the prescribed form and file same with the Department of Fisheries and Oceans Canada where BDC has taken security over fishing licences. If you are not provided sufficient particulars to enable you to complete the schedules, please request such information from the S&D Officer.
Where BDC has taken a marine mortgage, you are also required to use BDC’s form of Marine Loan Agreement.
SCHEDULE A
Subsequent Loan Facilities - BDC
Loan
Canada (revised 04/10)
ENDORSEMENT
Attached to and forming a part of Title Insurance Policy No. (
Issued by
FIRST AMERICAN TITLE INSURANCE COMPANY
2235 Sheridan Garden Drive,
Oakville, Ontario L6J 7Y5
Telephone: 905-287-3112 or 1-866-804-3112
1. Amend Date of Policy: Subsequent Advances
On the creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the Revolving Credit Operating Line Facility endorsement, the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability, provided that, as of the date of the creation of such future indebtedness and liability, the Insured:
i) conducts a subsearch of the Public Records (including searching executions) and confirms there are no liens, encumbrances or adverse interests registered against Title;
ii) does not have actual Knowledge of any liens, encumbrances or adverse interests; and
iii) confirms realty taxes are not in arrears.
2. Priority of subsequent advances: Date of Policy
The Insured acknowledges and agrees that on the creation of future indebtedness, other than pursuant to advances contemplated by the Revolving Credit Operating Line Facility endorsement, and if the Date of Policy is not deemed to be amended as provided for in paragraph 1, the Company is not liable for any loss or damage sustained by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy.
3. Increasing Amount of Insurance
Additional indebtedness may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the Insured, not to exceed the amount of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness, the Insured:
i) conducts a subsearch of the Public Records (including searching executions) and confirms
there are no liens, encumbrances or adverse interests registered against the Title;
ii) does not have actual Knowledge of any liens, encumbrances or adverse interests;
Subsequent Loan Facilities - BDC
Loan
Canada (revised 04/10)
iii) confirms realty taxes are not in arrears; and
iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount of Insurance.
4. Limitation of Company’s liability
The Insured acknowledges and agrees that:
i) in the event the total indebtedness of the mortgagor exceeds the Amount of Insurance and the Insured has not increased the Amount of Insurance as provided for herein, the Company’s liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the Land at the time of loss falls below the Amount of Insurance; and
ii) if the indebtedness of the mortgagor is increased at any time subsequent to the Date of Policy so that the total Indebtedness of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy
This endorsement is issued as part of the policy. Except as it expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsements, (iii) extend the Date of Policy or (iv) increase the Amount of Insurance. To the extent a provision of the policy or a previous endorsement is inconsistent with an express provision of this endorsement, this endorsement controls. Otherwise, this endorsement is subject to all of the terms and provisions of the policy and of any prior endorsements to it.
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
[pic] Thomas H. Grifferty, Regional Vice President,
International Operations
Issuing Guidelines:
In order to issue the Subsequent Loan Facilities endorsement the Insured must comply with the provisions stated in the endorsement. As to paragraph 1, it is not necessary to advise us of each subsequent advance, but you must maintain a record of your searches (including confirmation of taxes) and the date of each advance.
SCHEDULE B ENDORSEMENT TO TITLE POLICY
Attached to and forming part of Policy No. M-7762
Charge $Nil
05/06/2008 – Loan
Issued by
Stewart Title
Guaranty Company
herein called the Company
SUBSEQUENT LOAN FACILITIES ENDORSEMENT (SPECIAL)
1. Insurance covers all indebtedness and liability and payments do not reduce the Amount of Insurance
The Company acknowledges and agrees that the Insured Mortgage secures all present and future indebtedness and liability of the mortgagor up to the amount of insurance, as amended from time to time as provided for hereunder (the “Amount of Insurance”) and that, notwithstanding the terms and conditions of the policy and any endorsement, the Amount of Insurance shall not be reduced by payments made on any such indebtedness and liability.
2. Request to amend Date of Policy
On creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the Revolving Credit Endorsement, the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability, provided that, as of the date of the creation of such future indebtedness and liability, the Insured:
i) conducts a subsearch of the Public Records (including searching executions) and confirms there are no liens, encumbrances, or adverse interests registered against the Title;
ii) does not have Knowledge of any liens, encumbrances or adverse interests; and
iii) confirms realty taxes are not in arrears.
3. Priority of subsequent advances: Date of Policy
The Insured acknowledges and agrees that on the creation of future indebtedness and liability, other than pursuant to advances contemplated by the Revolving Credit Endorsement, and if the Date of Policy is not deemed to be amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under the policy arising or created subsequent to the Date of Policy.
This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX.
[pic]
|Countersigned: |
| |
| |
|Authorized Countersignature |
|Stewart Title Guaranty Company |
|Toronto, Ontario, Canada |
ENDORSEMENT TO TITLE POLICY
Attached to and forming part of Policy No. M-7762
Charge $Nil
05/06/2008 – Loan
Issued by
Stewart Title
Guaranty Company
herein called the Company
SUBSEQUENT LOAN FACILITIES ENDORSEMENT (SPECIAL)
- Page 2 -
4. Increasing Amount of Insurance
Additional indebtedness and liability may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the Insured, not to exceed the amount of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness and liability, the Insured:
i) conducts a subsearch of the public records (including searching executions) and confirms there are no liens, encumbrances, or adverse interests registered against the title;
ii) does not have Knowledge of any liens, encumbrances or adverse interests;
iii) confirms realty taxes are not in arrears; and
iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount of Insurance.
5. Limitation of Company’s liability
The Insured acknowledges and agrees that:
i) in the event the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and the Insured has not increased the Amount of Insurance as provided for herein, the Company’s liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the Land at the time of loss falls below the Amount of Insurance; and
This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX.
[pic]
|Countersigned: |
| |
| |
|Authorized Countersignature |
|Stewart Title Guaranty Company |
|Toronto, Ontario, Canada |
ENDORSEMENT TO TITLE POLICY
Attached to and forming part of Policy No. M-7762
Charge $Nil
05/06/2008 – Loan
Issued by
Stewart Title
Guaranty Company
herein called the Company
SUBSEQUENT LOAN FACILITIES ENDORSEMENT (SPECIAL)
- Page 3 -
ii) if the indebtedness and liability of the mortgagor is increased at any time subsequent to the Date of Policy so that the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the Insured by reason of any matters covered under this Policy arising or created subsequent to the Date of Policy.
Issuing Guidelines:
This endorsement is not applicable in construction situations. If any subsequent registrations become apparent through a subsearch of title, or otherwise, these are to be reported to the Company prior to any amendment to the Date of Policy or Amount of Insurance and the Company reserves the right to provide further underwriting.
This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated XXXXXXX.
[pic]
|Countersigned: |
| |
| |
|Authorized Countersignature |
|Stewart Title Guaranty Company |
|Toronto, Ontario, Canada |
SCHEDULE C
[pic]
Issued by:
CHICAGO TITLE INSURANCE COMPANY Endorsement
Subsequent Loan Facilities (BDC 04/10)
1. Insurance covers all indebtedness and liability and payments do not reduce the Amount of Insurance
The Company acknowledges and agrees that the Insured Mortgage secures all present and future indebtedness and liability of the mortgagor up to the amount of insurance as amended from time to time as provided for hereunder (the "Amount of Insurance") and that, notwithstanding the terms and conditions of the policy and any endorsement, the Amount of Insurance shall not be reduced by payments made on any such indebtedness and liability.
2. Amend Date of Policy: Subsequent Advances
On the creation of future indebtedness and liability up to the Amount of Insurance, other than pursuant to advances contemplated by the revolving credit facility endorsement the Company will deem the Date of Policy to be the date of the creation of such future indebtedness and liability provided that, as of the date of the creation of such future indebtedness and liability, the insured:
(i) conducts a subsearch of the public records (including searching executions) and confirms there are no liens, encumbrances or adverse interests registered against the title;
(ii) does not have actual knowledge of any liens, encumbrances or adverse interests; and
(iii) confirms realty taxes are not in arrears.
3. Priority of subsequent advances: Date of Policy
The insured acknowledges and agrees that on the creation of future indebtedness and liability, other than pursuant to advances contemplated by the revolving credit facility endorsement, and if the Date of Policy is not deemed to be amended as provided for in paragraph 2, the Company is not liable for any loss or damage sustained or incurred by the insured by reason of any matters covered under the Policy arising or created subsequent to the Date of Policy.
BDC Master Policy June 2012
[pic]
4. Increasing Amount of Insurance
Additional indebtedness and liability may be created by the mortgagor to an amount which exceeds the Amount of Insurance and in such case, the Company will increase the Amount of Insurance to the amount requested by the insured, not to exceed the amount
of the Insured Mortgage, and will amend the Date of Policy to the date of the creation of such additional indebtedness and liability, provided that, as of the date of the creation of such additional indebtedness and liability; the insured:
i) conducts a subsearch of the public records (including searching executions) and confirms there are no liens, encumbrances or adverse interests registered against the title;
ii) does not have actual knowledge of any liens, encumbrances or adverse interests;
iii) confirms realty taxes are not in arrears; and
iv) agrees to pay the Company the premium at the then applicable rates for the increase in the Amount
of Insurance.
5. Limitation of Company's liability
The insured acknowledges and agrees that:
i) in the event the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and the insured has not increased the Amount of Insurance as provided for herein, the Company's liability for loss or damage arising from matters covered under the policy will be limited to losses not exceeding the amount by which the value of the land at the time of loss falls below the Amount of Insurance; and
ii) if the Indebtedness and liability of the mortgagor is increased at any time subsequent to the Date of
Policy so that the total indebtedness and liability of the mortgagor exceeds the Amount of Insurance and if the Date of Policy is not amended as provided for herein, the Company is not liable for any loss or damage sustained or incurred by the insured by reason of any matters covered under the Policy arising or created subsequent to the Date of Policy
BDC Master Policy June 2012
[pic]
This endorsement is issued as part of the policy. Except as it expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsements, (iii) extend the Date of Policy, or (iv) increase the Amount of Insurance.
To the extent a provision of the policy or a previous endorsement is inconsistent with an express provision of this endorsement, this endorsement controls. Otherwise, this endorsement is subject to all of the terms and provisions of the policy and of any prior endorsements.
Dated:
CHICAGO TITLE INSURANCE COMPANY
Authorized Signatory
Note: This endorsement shall not be valid or binding until countersigned by an authorized signatory.
Issuing Guidelines:
In order to issue the Subsequent Advance Endorsement the insured must comply with the provisions stated in the endorsement.
As to paragraph 2, it is not necessary to advise us of each subsequent advance, but you must maintain a record of your searches (including confirmation of taxes) and the date of each advance.
BDC Master Policy June 2012
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