Commercial Real Estate

There are three basic vehicles commonly used to secure real property pledged in commercial real estate financings in Nova Scotia. The first and most common vehicle is a real property mortgage. A sum of money is borrowed (the “debt”) and arrangements for repayment are secured by a real property mortgage on lands owned by the borrower. Collateral security is usually arranged and can consist of assignments of rent, assignments of lease; chattel mortgages on personal property, (now for the most part replaced by general security agreements made pursuant to the Personal Property Security Act), assignments of contract, assignments of building, engineering and architectural contracts if the debt is incurred to finance the construction of a building, and guarantees, usually given by the principal shareholders of a corporate borrower, or any combination of the foregoing. The mortgage security vehicle is most appropriate for financing office buildings, apartment buildings and shopping malls. The debt is intended to be amortized over a specific number of years and fully retired at the end of the amortization term. It is not unusual, however, to increase the mortgage loan during the amortization period, and in such an event it is customary to release the original security and replace it with new documentation securing, in effect, what becomes a new loan. A mortgage is not usually an appropriate vehicle to secure a revolving line of credit.