Things you need to know about Cancellation of Chattel Mortgage.
1. What is a Cancellation of Chattel Mortgage?
A Cancellation of Chattel Mortgage is a creditor’s (the “mortgagee”) declaration cancelling the mortgage executed in his favor by the debtor (the “mortgagor”) over certain movable property. Movable property is generally all things that can be transferred from one place to another (i.e. car, phone). If the property is attached to immovable property it can be removed without damaging the immovable property
Once the mortgage is cancelled the property is no longer considered as security for the debt and the mortgagee cannot foreclose the property.
2. When do you need a Cancellation of Chattel Mortgage?
A Cancellation of Chattel Mortgage is used when the parties agree to cancel the mortgage over certain movable property. It is often used when the principal obligation secured by the mortgage has been fulfilled, cancelled or is no longer existing for any reason.
A Cancellation of Chattel Mortgage may also be used when the parties agree to replace the current property with another property. This will involve cancelling the mortgage over the existing property and executing another mortgage over the new property. In any event the parties are free to cancel the mortgage for any reason.
3. How can a Cancellation of Chattel Mortgage protect you?
A Cancellation of Chattel Mortgage protects the mortgagor by putting in writing the fact that the mortgage over his property has been cancelled and can no longer be foreclosed. Otherwise, there is a continuing risk the property will be foreclosed despite the fact there is no valid reason for the foreclosure anymore.
Further, an existing mortgage adversely affects the property’s value and how 3rd persons treat the property in business transactions. For example, a potential buyer will be more apprehensive about buying the property if there’s an existing mortgage over the same. This is especially true if the mortgage is annotated on the Certificate of Title of the property.
In certain cases the Register of Deeds will require the mortgagor to present a document from the mortgagee cancelling the mortgage before removing the mortgage’s annotation on the Certificate of Title. A Cancellation of Chattel Mortgage can serve this purpose.
4. What information do you need to create a Cancellation of Chattel Mortgage?
To create your Cancellation of Chattel Mortgage you’ll need the following minimum information:
- The type of mortgagee (i.e. individual or business) as well as name and details (i.e. nationality and address)
- The mortgagor’s name
- Brief description of the property mortgaged (i.e. type of property, address)