Jack enters into a lease with Mary for a term of one year. Before she leased the property, Mary granted a mortgage over the property to the Royal Bank of Canada. Mary does not advise the Royal Bank of Canada of the lease. A month later Mary defaults under the mortgage. Which of the following is true?

Question

Quizplus · Accepted Answer

When Mary granted a mortgage over the property to the Royal Bank of Canada, the bank's interest would have been registered as a first mortgage on the title. This means that the bank has a priority interest over any subsequent interests (like a lease) that are registered on the title. As the bank was not informed of the lease with Jack, their interest takes priority over the lease. Therefore, the bank can evict Jack and sell the property.

Jack Enters into a Lease with Mary for a Term