TITLE OPINIONS IN COMMERCIAL

MORTGAGE TRANSACTIONS

These materials were prepared by Michael Milani of McDougall Ready, Regina, Sask. for the Saskatchewan Legal Education Society Inc. seminar, Commercial Mortgage Transactions, May 1998.

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TITLE OPINIONS IN COMMERCIAL MORTGAGE TRANSACTIONS

I. INTRODUCTION

One would think that in a Torrens system of land registration the

furnishing of a "title opinion" should be a relatively straight-forward matter. However,

as a consequence of a number of competing considerations, including that requested

forms of opinion are often drafted based on laws of other provinces (where lenders often

have their head offices), there is not one, or even several, standard forms of opinion that

are in use in our jurisdiction.

Variety is not in itself of concern. However, where that variety derives

from concepts or assertions that have no place in Saskatchewan law. there is a cause for

caution.

In this paper I will use the tenns "Borrower" for the mortgagor, "Lender"

for the mortgagee (although of course not all mortgage transactions involve a loan),

"Property" for the mortgaged real property, and "Mortgage" for the conunercial

mortgage.

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II. OPINION/REPORT

The usua,1 context in which a written communication is delivered to a

Lender with respect to the title to real property is where the Lender has requested a

report as to the ownership of the property and the efficacy of the Mortgage.

Whether or not the word "opinion" is in fact used in the report, it is likely

the case that the reporting solicitor will be held to the same high standard as if a formal

opinion were delivered. As such, caution should be exercised when preparing less

formal reports, for unless the limits of the report are clearly set out in the report itself,

the risk of liability is equal, or perhaps enhanced, because of the absence of appropriate

assumptions and qualifications.

In the balance of this paper I will use the word "opinion". but its context

includes letters of report.

As well, in a number of areas of this paper I have described the propriety

of obtaining instructions from the Lender. All instructions should be in writing or

should be confirmed in writing.

III. ADDRESSEES

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The question of to whom the opinion is addressed has significance as the

approach followed establishes (at least in part) the universe of people entitled to rely on

the opinion.

The opinion will be addressed to the Lender. If the solicitor is acting for

the Borrower. the opinion will often be addressed to the Lender and its counsel.

In addition it is usually the case that the Lender will request that the

opinion also be addressed to future transferees and assignees of the Lender, either in the

address portion of the opinion or by way of statement in the body of the opinion. The

following is an example of acceptable language:

The opinions expressed herein are solely for the benefit of the addressees in connection with [describe the transaction], and the transferees Or

assignees of the Lender, in whole or in part, and any person acquiring a participation in the indebtedness of the Borrower to the Lender.

That approach is, in m view, reasonable. A change of Lender is a normal occurrence

during the life of a commercial loan.

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IV. DESCRIPTION OF THE TRANSACTION

It is useful to describe the subject transaction in the body of the opinion.

It is particularly appropriate to do so where there are many aspects to the transaction, but

in respect of which the author of the Opinion has been involved in only one very small

part. As well, be wary of proposed forms of opinion that state "We have participated in

the preparation of ... " . If the solicitor has not actually been involved in the drafting of

documents, he or she should not be making such a representation.

There is at least one other advantage of describing what is occurring. If

there is another element to the transaction that has not been noted, a reviewer of the

opinion is afforded the opportunity to note its absence, and to advise the solicitor.

V. DESCRIPTION OF PROPERTY

The legal description of the property should be set out in the opinion in

the precise language that appears in the Certificate of Title. If the Lender requires that a

reference to the civic address appear in the opinion, you might consider the following

sort of language:

... the legal description of which is • and, to the best of our knowledge, based on [describe source of knowledge, such as the taxation department of the municipality] the civic address of which is .:

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This caution is appropriate, as the same certainty does not exist with respect to listings of

civic addresses as attaches to legal descriptions. Many of the off-title searches are based

on the civic address. As such the solicitor may want to include a statement (perhaps as

an assumption) as to what the solicitor understands the civic address to be, whether or

not the Lender requires that the civic address be set out.

VI. ASSUMPTIONS

There may be a plethora of assumptions associated with a particular

transaction. The following are some of the assumptions that often appear in an opinion:

1. That the documents and searches provided by public registries and governmental and civic authorities are accurate and complete;

2. The authenticity of all documents submitted to us as originals;

3. The confonnity to originals of all documents submitted or presented to us as certified or notarial copies or photocopies;

4. The identity and capacity of all individuals acting or purporting to act as public offices;

5. The genuineness and authenticity of all signarures and all documents submitted or presented to us.

If the solicitor opines on matters relating to a surveyor's certificate (real

property report), he or she may also wish to state as an assumption that the report is

accurate and complete and lists all encroachments.

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If the Borrower is a corporate entity it should be assumed that the

Borrower had no prior corporate names nor has it been a party to an amalgamation,

Upon stating this assumption the solicitor is justified in not searching prior names in

respect of Personal Property Registry and off-title searches (described later in this

paper). If such names exist, then further searches are warranted.

Depending on whether one is involved in the execution of the documents,

and depending on whether an opinion as to enforceability is being furnished, an

assumption of the following sort may also be required:

That the Mortgage has been duly authorized, executed and delivered by each of the parties hereto and that it constitutes a legal, valid, binding and enforceable obligation of each such party under the laws of the Province

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If the solicitor is delivering an enforceability opinion, then the second part of that

assumption would not be appropriate, just as the first part should be deleted if the

solicitor is responsible for ensuring due authorization, execution and delivery.

Related to assumptions are statements that an officer's certificate setting

out specified factual matters has been relied upon. It is a good practice to append a

photocopy of the signed certificate to the opinion, as a schedule or an exhibit.

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The usual way in which the two are tied together is as follows:

For the purposes of the opinions set out in paragraphs. and. we have relied on the certificate of an officer of the Borrower, a copy of which is attached as Exhibit.

In the event the opinion is to deal with registrations under The Personal

Property Security Act, 1993 (Saskatchewan) (for example, in respect of an assigrunent of

rents or a security agreement covering chattels), then a number of other assumptions (as

well as qualifications) are appropriate. Such matters are beyond the scope of this paper.

VI!. TITLE SEARCHES

In order to provide the appropriate opinion it is necessary to obtain a

certified copy of the Certificate of Title and a general record certificate in the name of

the registered owner. The purpose of the searches is obvious: the statutory mandate

comes from sections 68 and 180 of The Land Titles Act (Saskatchewan). It is a

dangerous practice to work from an uncertified copy of title. Additionally, it is almost

always the case that a copy of each encumbrance registered against the title should be

obtained and reviewed. If for some reason those searches are not undertaken, the

opinion should be qualified accordingly.

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If the opinion describes the Borrower as a body corporate duly registered

to carryon business, the solicitor may state that that opinion is based solely on the

certificate of status "dated. and provided by the Corporations Branch (Saskatchewan)".

The solicitor should also consider whether a historical search (of prior

titles) should be undertaken. Prior titles to a property may provide infonnation germane

to the transaction. For example, if the property was at one time owned by an oil

company, additional environmental investigations may be warranted,

VIII. OFF-TITLE SEARCHES

From the perspective of a Lender, the title searches tell only part of the

story. It is often the case that the Lender will require counsel to conduct the appropriate

additional searches and investigations, and report on them.

At times a Lender will specifically direct the solicitor as to the searches to

be conducted. At other times it is within the discretion of the solicitor as to what

searches to obtain, with the Lender sometimes looking for the following sort of statement

in the opinion:

The searches we conducted and which are described in Schedule. are, in our opinion, the usual searches and investigations that are obtained in Saskatchewan by or on behalf of a Lender for the purposes of a commercial real estate financing transaction.

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If there is a particular search that should normally be obtained, but the instructions from

the Lender were not to do so (perhaps because of timing. or cost), that fact (or

qualification) should be set out in the opinion.

IX. OPINIONS:

(al Title

First and foremost, the Lender wishes to confinn that the Borrower is the

owner of the Property, subject to permitted encumbrances.

It is usually the case that the requested opinion will include language to

the effect that the Borrower has "good and marketable title" to the Property. There has

been debate as to whether that sort of language is appropriate, for there may be issues as

to what the word "marketable" conveys. There is no such concept under the Torrens

system. A concise discussion of this issue appears in Estey, Legal Opinions in

Commercial Transactions (Toronto: Butterworths Canada Ltd., 1990). On balance,

however, in my view the inclusion of the words "good and marketable" does not result

in a representation that the property can be sold. As Estey states at page 175:

The phrase "good and marketable" is, generally speaking, understood to mean a title that is sufficiently free from defects that an order of specific perfonnance could be granted in respect thereof.

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An example of the type of language that often appears is:

The Borrower has good and marketable title to the Property in fee simple, free and clear of all charges, mortgages, liens, claims, or other encumbrances (the "Encumbrances"), save and except for the Mortgage and the Encumbrances delivered in Schedule •.

Note that the "encumbrances" are more than merely the encumbrances registered against

the title. This issue is dealt with subsequently in this paper.

It would be preferable if the opinion could simply describe the Borrower

as being the registered owner of an estate in fee simple. If one is pressed to refer to

"good and marketable title" , one approach is to define or limit what is meant by the use

of that phrase, by limiting the opinion to the searches obtained. An example of that

approach is:

(b)

As used herein, the tenn "good and marketable title" means that the Borrower is the registered owner of an estate in fee simple of the Property subject only to:

(i) the registered encumbrances described in Schedule .;

(ii) the unregistered encumbrances described in Schedule.;

Validity of Mortgage

EVen if no opinion is being furnished as to the enforceability of the

Mortgage, a Lender will usually at a minimum require the following sort of statement:

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The Mortgage constitutes a good and valid fixed and specific charge in favour of the Lender against the Property. subject only to the encumbrances set out in Schedule •.

Some practitioners take the view that even this language connotes

enforceability, and that as a result the detailed qualifications should be set out.

(c)

appropriate:

(d)

Registration

The follqwing sort of statement may be requested, and, in my view. is

The Mortgage was validly and properly registered against the title to the Property in the appropriate land registry office on the date and with the particulars set out on Schedule·. No further or other filing. registration or recording of the Mortgage is necessary or desirable to secure, preserve, perfect or protect the mortgage and charge contained therein and constituted thereby.

Enforceability

If an enforceability opinion is required, the first sentence of the paragraph

cited immediately above (at (c)) could have the following phrase added to the end of it

"and is enforceable against the Borrower in accordance with its terms". If an

enforceability opinion is given, then a raft of qualifications (described later in this paper)

is required.

(e) Encroachments

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Lenders will in some circumstances ask that the opinion specifically

address the issue of whether any encroachments exist as against the Property. In order to

describe such encroacln!lents the solicitor will need to rely, among other matters, on the

real property report, and it is for that reason that it is important that there be an

assumption that the real property report is accurate and complete and lists all

encroachments.

x. OUALIFICA TIONS

As noted above, this paper does not extend to issues relative to

registrations under The Personal Property Security Act, 1993 (Saskatchewan). The

following sort of qualifications are required in connection with real property issues:

(a) General Qualification as to Bankruptcy Laws

The following language should be included in all opinions where

enforceability is spoken to:

the enforcement of the Mortgage or any judgment arising out of or in connection therewith may be limited by any applicable bankruptcy, reorganization, winding-up, insolvency, moratorium, realization or other laws of general application affecting creditors' rights from time to time in effect.

(b) Equitable Limitations

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Similarly, the following sort of language should appear in order to

describe equitable limitations:

(e)

The enforcement of the Mortgage or any judgment arising out of or in connection therewith is subject to the equitable or statutory powers of the courts to stay proceedings before them, to stay the execution of judgments and to grant relief against forfeiture, and no opinion is expressed as to the availability of equitable remedies for the enforcement of any provision of the Mortgage.

Judgment Currency

If a lending transaction provides for the possibility payment of monies in a

foreign currency, regard should be had to the provisions of the Currency Act, R.S.C.

1985 c.C-52, and consideration given to including the following sort of qualification:

The Currency Act (Canada), in effect, precludes a court in Canada from giving judgment in any currency other than lawful money of Canada.

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(d) Judgment Interest Rate

Section 3.0 of The Executions Act, R.S.S. 1978 c.E-12 (Saskatchewan)

limits the rate of interest on a judgment debt. This can be particularly significant in a

mortgage transaction, because it may be that the judgment interest fate begins to apply at

the order nisi stage, The following qualification may be appropriate:

Notwithstanding anything contained in the Mortgage, The Executions Act (Saskatchewan) provides that judgment debts shall bear interest at the rate specified thereunder; consequently, provisions in the Mortgage which may be interpreted to provide otherwise may not be legal, valid, binding or enforceable.

(e) Effective Time and Change of Fact Of Law

The following language can be used to limit the use of the opinion, and to

clarify that it "speaks" only from the date that it is rendered.

This opinion is given as of the date first above written and shall be effective upon delivery only for the transactions referred to above. We disclaim any obligation or undertaking to advise the addressees or any other person of any change in the law or any fact which may come or be brought to our attention after the date of this opinion.

The effective dates of the respective searches are also relevant. This topic is discussed

later in this paper.

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Severability

A Mortgage may contain provisions that are not enforceable in

Saskatchewan. One example is the purported ability of the mortgagor to sell the land

under a power of sale. Although the mortgage may contain a severability provision,

along the following lines,

[a Jny covenant or provision hereof determined to be void or enforceable in whole or in part shall not be deemed to effect or impair the validity of any other covenant or provision hereof

the provision is not necessarily determinative of the issue. The following qualification

should be included:

(g)

Any provision of the Mortgage purporting to allow severance of an invalid, illegal or unenforceable provision. or restricting its effect, would be enforced only in the discretion of the court and may not be legal, valid, binding or enforceable if such severance or restriction would not accord with public policy or would involve the court making a new contract for the parties.

Reasonable Demands

A (commercial) Mortgage often purports to grant the Lender the ability to

make certain determinations and exercise certain rights in its "sole and unfettered

discretion". Notwithstanding such broad language, the Courts have imposed collars on

the exercise of such powers, which in my view warrants the inclusion of the following

qualification:

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The requirement that detenninations, requests or demands which may be made pursuant to the exercise of discretion must be exercised reasonably.

The solicitor may wish to deal explicitly with certain types of rights and

powers set out in the Mortgage, in the following sort of way:

(hl

We express no opinion on any provision of the Mortgage which directly or indirectly:

(i) purports to establish evidentiary standards, including those which state that certificates and determinations are to be treated as conclusive;

Oi) purports to exclude unwritten variations, amendments, waivers or consents; or

(iii) purports to waive rights to notice or restrict access to legal or equitable remedies or waive the benefit of defences, doctrines, principles or protections which are judged by a court to be based on public policy.

Limitation of Actions

It is trite to note that if a Lender is to enforce the Mortgage, it must be

enforced in accordance with law, including applicable limitation periods. The following

qualification is in order:

(il

Our opinion with respect to the validity and enforceability of the Mortgage is subject to applicable laws regarding limitation of actions.

Legal Fees

In order for legal fees to be collected from a Borrower on a solicitor and

client basis, an explicit statement to that effect should be contained in the Mortgage.

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However, even with such language the Lender's right to collect fees on this basis is not

absolute, warranting inclusion of the following qualification:

provisions in the Mortgage providing for recovery of fees and expenses may be restricted by a court, and counsel fees are subject to taxation.

There is a good deal of Saskatchewan case law on the issue, particularly respecting the

ability to collect legal fees at the leave to foreclose stage: see, for example GIBe

Mortgage Corp. v. Prebushewski, [1992J SJ. No. 566 (Q.B.); Canada TrusteD

Mortgage Co. v. Murray (1992), 104 Sask R. 103 (Q.B.).

(j) Default Rate of Interest

The following qualification is appropriate, as the ability to charge a

higher, "default", rate of interest is not clear:

Those provisions in the Mortgage which provide for payment of a higher rate of interest in respect of any amount in default than would otherwise be payable in respect of such amount may not be legal, valid, binding or enforceable.

A Lender may also permit the following qualification:

(k)

We express no opinion as to the enforceability of the Mortgage in respect of interest where the right of such interest in excess of that pennitted by law including the Criminal Code (Canada).

Waiver of Statutes

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A mortgage granted by a corporate Borrower should include an agreement )

by the Borrower that the provisions of The Limitation of Civil Rights Act, R.S.S. 1978

c.L-16 and The Land Contracts (Actions) Act, R.S.S. 1978, c.L-3 do not apply. The

solicitor should ensure that the language is in terms appropriate to create the "waiver".

If no such provision appears, then a qualification could be included in the Opinion.

(I) Sale of Release of Part of Land

A Mortgage may often purport to permit the Lender to sell or dispose of

any part of the mortgage land. However, because of Co-operative Trust Co. of Canada

v. Target 211ndustries Ltd. (1988), 63 Sask. R. 13 (C.A.), the following sort of

qualification should be included:

(m)

If the Lender releases to a third party all or any part of the collateral which is real property or an interest therein, and which is subject to the provisions of The Land Titles Act (Saskatchewan), without the prior written consent of the Borrower. the covenant for payment by the Borrower may not be enforceable notwithstanding the provisions of the Mortgage to the contrary.

Extra Judicial Enforcement

It is probably worth stating explicitly that all enforcement steps in respect

of the mortgage must be taken through the courts.

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The following is a fairly detailed qualification provision:

The validity and enforceability of the obligations of the Borrower under the Mortgage or any judgment arising out of or in connection therewith are subject to the following:

(i) any applicable bankruptcy, insolvency, windingRup, arrangement, liquidation, reorganization, moratorium or other similar laws affecting creditors' rights generally;

(ii) equitable limitations on the availability of remedies;

(iii) the statutory power of a court to grant relief from forfeiture;

(iv) applicable laws regarding limitation of actions;

(v) general principles of equity which may apply to any proceeding in equity or at common law;

(vi) the power of a court to stay proceedings before it and to stay the execution of judgments;

(vii) the discretion which a court may reserve to itself to decline to hear an action if it is contrary to public policy for it to do so, or if it is not the proper forum to hear such action;

(viii) common law and equitable limitations upon the right of a creditor to receive payment of amounts stated to be payable on demand;

(ix) common law and equitable limitations upon the right of a party to the Mortgage to enforce the Mortgage on the basis of a default of a minor or non-substantive nature, such as the failure to produce a document in a timely manner;

(x) any provisions of the Mortgage that purport to establish evidentiary standards, such as provisions stating that certain calculations or certificates will be conclusive and binding, may not be enforceable or may be limited in their application at common law or in equity;

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(xi) we express no opinion as to the enforceability of any provisions under the Mortgage which purport to:

(a) make a receiver and manager appointed by the Lender the agent of the Borrower or to absolve the Lender of the responsibility for its acts;

(b) provide for non-judicial foreclosure or self-help remedies;

(xii) provisions which purport to bind or affect any person not a party to the Mortgage may not be enforceable by or against or bind such person;

(xiii) no opinion is expressed as to any provisions purporting to exclude unwritten variations, amendments, waivers or consents;

(xvi) provisions which impose an obligation to use diligent, best or reasonable efforts to achieve certain results are sUbjective and the assessment of these matters ultimately rests with the court;

(xv) if the Lender releases to a third party all or any part of the collateral which is real property or an interest therein, and which is subject to the provisions of The Land Titles Act (Saskatchewan), without the prior written consent of the Borrower, the covenant for payment by the Borrower may not be enforceable notwithstanding the provisions of the Mortgage to the contrary;

(xvi) as the Mortgage covers real property and chattels, the Lender should consider whether to concurrently realize upon both to avoid the underlying debt becoming extinguished, as might occur in the event of realizing only upon either the real property or the chattels;

(xvii) provisions in the Mortgage providing for the recovery of fees and expenses may be restricted by a court, and counsel fees are subject to taxation;

(xviii) the Currency Act (Canada) in effect precludes a court in Canada from giving judgment in any currency other than lawful money of Canada;

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(xix) Notwithstanding anything contained in the Mortgage, The Executions Act (Saskatchewan) provides that judgment debts shall bear interest at the rate specified thereunder; consequently. provisions in the Mortgage which may be interpreted to provide otherwise may not be legal, valid, binding or enforceable;

(xx) This opinion is given as of the date first above written and shall be effective upon delivery only for the transactions referred to above. We disclaim any obligation or undertaking to advise the addressees or any other person of any change in the law or any fact which may come or be brought to our attention after the date of this opinion;

(xxi) Any provision of the Mortgage purporting to allow severance of an i~valid, illegal or unenforceable provision, or restricting its effect, would be enforced only in the discretion of the court and may not be legal, valid, binding or enforceable if such severance or restriction would not accord with public policy or would involve the court making a new contract for the parties.

OFF-TITLE SEARCHES

As noted above, the nature and extent of the off-title searches depends on

the instructions from the Lender. lfthe Lender's instructions are unclear, or if the

Lender is, in effect, silent on the issue, it would be prudent and safe practice for the

solicitor to confirm in writing with the Lender the searches that are being obtained. The

failure to obtain a search (or receive instructions not to obtain it) may be prima facie

evidence of negligence.

Consideration of the type, age and use of the Property will influence what

searches should be obtained. A list of a number of the sort of off-title searches that

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might be obtained are set out below. Not all of these searches will be required in all

circumstances.

(a) surveyor's certificate (real property report);

(b) building siting certificate. One can describe the building siting certificate as describing the location of structures on the Property, and specifying that such locations are in compliance with the municipal zoning regulations, subject to specified exceptions, and that the current use of the Property is a permitted use pursuant to the applicable bylaw;

(c) zoning certificate (to establish compliance with municipal zoning requirements);

(d) search letter from the by-law enforcement department of the municipality;

(e) search letters from fire marshall and from other municipal departments, as to outstanding work orders;

(t) environmental file search response from the Department of Environment and Resource Management. The solicitor should consider whether there is a duty to advise the Lender that an environmental audit could be obtained, and to obtain written instructions;

(g) search letter from SaskPower as to outstanding utility accounts;

(h) search letter from SaskPower gas and electrical inspection division as to outstanding work orders;

(i) search letter from SaskEnergy as to outstanding utility accounts;

G) tax certificate (in respect of real property taxes, local improvement charges and business taxes). Note that in some municipalities it is necessary to specifically refer to all of these types of taxes and charges when ordering the search. It is also prudent to specifically request that the municipality confirm whether any assessment appeals are pending;

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(k) sheriff's certificate from the applicable judicial centre (as to writs of execution);

(I) search of the records of Superintendent of Bankruptcy confirming that there are no assignments, petitions or bankruptcy proceedings with respect to the Borrower;

(m) search letter from the municipality in respect of parking requirements, and a certificate establishing that the requirements have been met;

(n) Personal Property Registry search results in the name of the Borrower;

(0) Bank of Canada search in the name of the Borrower;

(p) certificate as to actions involving the Borrower from the Local Registrar. Consideration will need to be given as to which judicial centres are to be the subject of the search (and in particular whether the search will be limited to the judicial centre in which the Property is located);

(q) search letter from Saskatchewan Revenue and Finance as to the status of remittances in relation to The Revenue and Financial Services Act (Saskatchewan);

(r) search letter from Saskatchewan Workers' Compensation Board;

(s) search letter from the local Health District as to outstanding work orders;

(t) search letter from Saskatchewan Municipal Government, Housing Protection Services and Facilities Division advising as to:

(i) outstanding deficiencies under The Boiler and Pressure Vessel Act (Saskatchewan);

(ii) outstanding deficiencies relating to elevating devices under The Passenger and Freight Elevator Act (Saskatchewan);

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(iii) licenses issued under The Electrical Licensing Act (Saskatchewan);

(iv) licenses issued under The Gas Licensing Act (Saskatchewan);

(u) search letter from Saskatchewan Labour Relations Board advising as to certification orders or outstanding applications against the Borrower;

(v) search letter from Saskatchewan Labour, Labour Standards Branch, advising as to outstanding complaints with respect to the Borrower;

(w) certificate of status from the Saskatchewan Business Corporations Branch with respect to the (corporate) Borrower;

(x) search letter from water department of the municipality as to the status of account;

(y) search letter from Saskatchewan Liquor and Gaming Authority as to liquor permits;

(z) search letter from Saskatchewan Occupational Health and Safety as to outstanding officer's reports, notices of contravention or prosecutions;

(aa) search letter from Saskatchewan Highways and Transportation as to unregistered easements affecting the Property;

(bb) search letter from SaskPower as to unregistered easements affecting the Property;

(cc) search letter from SaskEnergy as to unregistered easements affecting the Property;

(dd) search letter from SaskTel with facilities diagram advising as to unregistered easements affecting the Property;

(ee) search letter from SaskEnergy as to structures encroaching on SaskEnergy's easements or facilities located on the Property. Such

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a search is appropriate as SaskEnergy requires that any structure built over gas lines must be removed;

(ft) copy of registered plan from the Saskatchewan Chief Surveyor's office;

(gg) search letter from the appropriate municipality confirming that the property is not designated as a heritage property as contemplated by The Heritage Property Act (Saskatchewan);

(hh) if farm land is involved, special considerations apply. Regard should be had to Part VI of The Saskatchewan Farm Security Act, and The Crop Payments Act (Saskatchewan) and The Agricultural Leaseholds Act (Saskatchewan).

LAW OF THE OPINION

The opinion should be limited to the applicable law, using the following

sort of language:

We are qualified to practice law only in the Province of Saskatchewan. All opinions expressed herein are as to the laws of the Province of Saskatchewan and the laws of Canada applicable therein, and we express no opinion as to the laws of any other jurisdiction.

XIII. EFFECTIVE DATE

The opinion will be dated, but in addition it should be made clear in the

opinion that the effective date of the opinions themselves are as at the respective dates of

the searches, which are.set out in the body of opinion or in the schedules. As well, the

following sort of language could be included:

This opinion and the reports described herein are subject to changes occurring between the respective dates of such information, reports and advice and the date hereof.

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XIV. ENCUMBRANCES

The opinion (often in a schedule) should describe all of the registered

encumbrances. If the solicitor chooses to do more than simply list the encumbrance

number and date of registration, he or she may wish to state that the description is only a

summary description of the document.

Other encumbrances which affect title, but do not show from a certified

copy of title and general record certificate, include and can be described as follows:

<aJ any exceptions, qualifications, encumbrances, liens, estates or interests implied by virtue of, or contained in, The Land Titles Act (Saskatchewan), including the reservations, limitations, provisos and conditions contained in the original grant from the Crown and any unregistered restrictions, agreements, easements, servitudes, licenses, rights of way or other similar rights or agreements of which we have no notice and which are not required to be registered against the Property;

(b) any right of any governmental or quasi-governmental authority of expropriation, access or use, or any similar rights conferred by or reserved in any statutes of Canada or the Province of Saskatchewan;

(c) all other applicable governmental orders, by-laws and regulations, including the building by-laws and regulations made by the City of. or its predecessors;

(d) any and all unregistered or inchoate liens, charges, adverse claims, security interests or other encumbrances of any nature whatsoever now or hereafter claimed or held by Her Majesty the Queen in right of Canada, Her Majesty the Queen in right of any Province of Canada or by any other governmental department, agency or

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(e)

(I)

(g)

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authority under or pursuant to any applicable legislation, statute or regulation;

any liability for municipal realty taxes and utilities arising after the date of the search results set out in Schedule. hereto;

a person entitled to file a builders' lien in respect of real property in Saskatchewan, or to give written notice of a" claim of lien, has 40 clear days from the last day of work or supply of services or materials within which to file the same or to give notice in order to claim against holdback funds, and a builders' lien can be filed and notice given at any time, and no opinion is expressed as to liens which have not been filed, or in respect of which notice may be given but which may be filed within or notice given such period or such extended period as may be permitted by The Builders' Lien Act (Saskatchewan) ;

title to the Property may be subject to or affected by environmental contamination, pollution, or other substances that cause or may cause pollution of the environment (collectively, the "Pollutant") that may affect the use or marketability of the Property and for which the Borrower and the Borrower's successors and assignees may be liable in the way of damages, clean-up costs and other liabilities that may arise therefrom under applicable statutes, regulations and other laws;

(h) unregistered leases, options to lease and agreements to lease in existence as at the date of this opinion other than those for a life or lives or for a term exceeding three years;

(i) liens for realty taxes, charges, rates and assessments or for public utility rates or charges not yet due;

(j) the rights of municipalities under The Tax Enforcement Act (Saskatchewan);

(k) any public highway or right-of-way or other public easement howsoever created upon, over or in respect of the Property, other than in favour of SaskPower, SaskEnergy, SaskTel and Her Majesty the Queen in Right of Saskatchewan (as represented by the Minister

29

responsible for the Department of Highways) the results of which inquiries are described in Schedule.;

(I) any zoning regulation made pursuant to the Aeronautics Act (Canada);

(m) the interests described in sections 69, 70, 71 and 116 of The Land Titles Act (Saskatchewan);

XV. GENERAL

following:

Other miscellaneous provisions which may appear in opinions include the

(a) The survey report does not disclose the height or areas of the buildings, and as such we are unable to determine whether or not the buildings on the Property comply with the height or floor area requirements of the bylaw;

(b) Relying upon the infonnation shown on the real property report, the location of the buildings on the Property comply with the coverage and setback requirement of the bylaw and the Property complies with the lot area and the lot frontage requirements.

(c) We express no opinion herein as to the beneficial title to the Property or the legal or beneficial title to personal property.

(d) The information described above was provided to us by the insurance agent by way of cover note or written memorandum. We did not receive a copy of the insurance policy, and as such our opinion as to insurance is based solely on the information provided by the Borrower's insurance agent and does not include a review of the insurance policy.

)

)

)

30

(e) Based on the certified copy of the directors' resolution, the certificate of incumbency, the other certificates and the certificate of status we obtained, the Borrower has been duly incorporated with full powers and authority to hold, mortgage and otherwise deal in the Property; that all necessary corporate action has been taken to authorize the borrowing of the principal sum stated in the Mortgage with interest as therein provided and the giving of the mortgage security therefore; and that those persons signing documents have authority to do so.

as/hfmongsem.doc/April24. 1998