When the mortgage comes due: Managing estate-owned property amidst estate disputes

Law360 Canada (October 21, 2026, 1:21 PM EDT) --

Margarita Grup

Estate litigation can take months or years to resolve, but mortgage obligations do not wait. For estate trustees and beneficiaries, the core challenge is preserving the value of estate property while competing claims are litigated.

When an individual dies owning real property subject to a mortgage, the mortgage does not die with them. The estate remains responsible for dealing with the secured debt, and the estate trustee must determine how best to preserve, refinance or ultimately dispose of the property. What might otherwise be a routine aspect of estate administration can become considerably more complicated when the estate itself is the subject of litigation.

Disputes over a will’s validity, the conduct or appointment of a trustee, or asset distribution can bring administration to a standstill. Trustees may hesitate to act while challenged, and beneficiaries may disagree on whether to retain, refinance, or sell property. Meanwhile, mortgage payments remain due, renewals approach, and lenders retain contractual and statutory enforcement rights, creating significant risk that an unresolved dispute will jeopardize an asset that in many cases forms the bulk of the estate’s value.

Estate litigation and mortgage obligations operate on vastly different timelines. Contested applications take months or years, whereas mortgagees require swift responses. An estate dispute does not prevent a lender from enforcing security. In Ontario, the Mortgages Act governs power of sale rights, and trustees should never assume a lender will defer enforcement pending dispute resolution.

When default or power of sale are a possibility, the trustee must assess whether the mortgage is truly in default, verify amounts and evaluate the estate’s capacity to cure default. The trustee should consider the equity of the property and determine whether a negotiated resolution or voluntary sale would preserve more value than a forced sale.

Any delay carries substantial risk for the estate. Accumulating interest, enforcement costs and forced sales rapidly erode equity and therefore can impact the value of the estate. Trustees must balance the benefit of retaining property against financing costs, as passive delay can expose the estate to severe, avoidable losses.

There are various options that estate trustees may consider as a solution, from bringing the mortgage into good standing and negotiating extra time, to refinancing, voluntary sale or seeking court directions. The objective is to make deliberate decisions protecting the estate’s overall financial position and beneficiary interests.

However, complications often escalate when no trustee can act, such as in situations of intestacy, before probate issuance, upon executor renunciation or incapacity, during will challenges or when co-trustees are deadlocked. The absence of an active decision maker does not stay mortgage obligations. Waiting for litigation to conclude exposes the estate to compounding interest, fees, and enforcement. In these situations, practical steps like lender communication and maintenance must be addressed immediately. In these cases, appointing an Estate Trustee During Litigation (ETDL) offers a practical solution. A neutral trustee can attend to immediate administrative steps with respect to the estate while the dispute is dealt with by the court. These immediate steps include dealing with the mortgagees, maintaining payments, negotiating renewals, or arranging sales without advancing one party's litigation position over another.

Refinancing the property is another matter that estate trustees need to carefully consider. There are times when an estate trustee is unable to access cash that is needed. Perhaps the estate is asset rich and cash poor. Money may be needed to implement post-mortem strategies or perhaps the term of a mortgage has ended. Borrowing against estate assets may be problematic because the estate is involved in litigation and the litigants dispute who is the proper estate trustee. First tier lenders may be disincentivized from being involved because there is no authorized party to seek out a loan, there is no income to support the loan and no court order has yet clarified who is in charge. Estate trustees must also consider the distinction between renewing existing debt on standard terms versus increasing leverage or borrowing to benefit specific parties. One needs to seek out experienced counsel to navigate the waters with the beneficiaries, adverse parties, to deal with an ETDL or explore options under the Mortgages Act, R.S.O. 1990, c. M.40 or possibly seek alternate financing. Where consensus is impossible and deadlines loom, seeking court directions is safer than defaulting or proceeding without clear authority.

In situations where payments are unsustainable, refinancing is unfeasible or ownership poses excess risk, selling the property may be most prudent. However, sales can also provoke dispute over price and timing. Estate trustees must consider the upside of keeping the property against the potential delay and the resulting risk from same. Prompt voluntary sales preserve far more value than forced sales, whereas waiting for complete beneficiary consensus can severely limit financial remedies.

Ultimately, mortgage disputes involving estate-owned property require estate trustees to look beyond the immediate litigation. The trustee must preserve the estate’s assets, comply with the mortgage obligations, protect the interests of the beneficiaries and act within the scope of their authority. These responsibilities may pull in different directions, particularly where the trustee’s own conduct or authority is being challenged. For beneficiaries, the same practical consideration applies. An objection to a proposed transaction may ultimately be justified, but allowing a mortgage to fall into default while that objection is litigated may result in unnecessary costs or, in the worst case, the loss of a valuable asset. Preserving the estate’s value does not require the parties to agree on every substantive issue before action can be taken. It requires timely consideration of the steps necessary to prevent an interim problem from dictating the ultimate outcome.

A property may eventually be sold, the mortgage discharged and the remaining proceeds distributed. The parties may ultimately resolve their differences through litigation or settlement. But if the property is lost through an avoidable power of sale before their rights can be determined, the estate may never have the opportunity to realize its full value.

The challenge in estate litigation is not simply determining who is right. It is ensuring that, by the time that question is answered, there is still an estate left to protect.

For those who work with these issues or are interested in learning more, a lunch and learn seminar on mortgage disputes with estate-owned properties will be hosted by Wagner Sidlofsky LLP on October 27, 2026, starting at 12:00 pm, presented by Adam J. Wygodny, James Dunphy and Margarita Grup. For more information and to register, please access this link.

Margarita Grup is a lawyer at Wagner Sidlofsky LLP, practicing in the estate and commercial litigation groups.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, LexisNexis Canada, Law360 Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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