For private lenders, the period between issuing a commitment and advancing funds is where risk is either caught or missed. Once money leaves the trust account, your leverage changes completely. This is why experienced lenders rely on a lawyer to run a rigorous pre funding review. Here is what that review actually involves.
Title search and priority review
The starting point is a full search of the parcel register. Your lawyer confirms that the borrower actually owns the property, in the capacity claimed, and identifies each instrument registered on title. That includes:
- Existing charges and whether they will be discharged, postponed, or remain in priority
- Liens, cautions, and certificates of pending litigation that could affect your security
- Easements and restrictive covenants that affect the value or use of the property
- Notices such as Site Plan Agreements or development obligations that a lender should understand before funding
Priority is everything for a lender. If you expect a first mortgage, your lawyer's job is to make sure nothing on title says otherwise on the day of registration.
Execution and writ searches
A writ of execution filed against the borrower can attach to the property and take priority over your charge. Your lawyer searches executions against every registered owner. Where a writ appears, it must be cleared before funds are advanced: paid out, withdrawn, or resolved by a statutory declaration confirming the debtor is a different person, or by a letter from the creditor confirming the same.
Identity verification and KYC
Mortgage fraud remains one of the most significant risks in private lending. A lawyer verifies the identity of the borrower and any guarantor against government issued identification and confirms the information matches title. Where a corporation is borrowing, your lawyer reviews the corporate profile, confirms the entity is active and in good standing, and verifies signing authority for the individuals executing the mortgage documents.
Corporate status and authority
For corporate borrowers and guarantors, the review goes further:
- Certificate of status confirming the corporation exists and has not been dissolved
- Authorizing resolutions confirming the directors approved the borrowing and the charge
- Guarantees properly executed, with independent legal advice where circumstances call for it
Where the borrower or the property crosses provincial lines, an opinion from local counsel in that jurisdiction may be required before funding.
Insurance confirmation
Before funds are released, your lawyer confirms that property insurance is in place with your interest noted as mortgagee, typically with a standard mortgage clause. If the building burns down the day after closing, this single document determines whether your security survives.
Trust ledger and funding flow
Every dollar in and out of the transaction is accounted for on the trust ledger. Your lawyer confirms:
- The advance matches the commitment
- Prior encumbrances being paid out match current discharge statements
- Holdbacks, broker fees, and lender fees are correctly applied
- The net proceeds flow to the right parties and nowhere else
Discrepancies in the funding flow are one of the most common places problems surface, and they are far easier to fix before funding than after.
Discharge statements for prior mortgages
Where your loan pays out an existing mortgage, your lawyer obtains a current discharge statement directly from the prior lender, confirms the per diem, and ensures the payout figure will actually clear the charge. An underestimated payout can leave a prior mortgage sitting on title ahead of yours.
Compliance with the commitment
Finally, your lawyer confirms that every condition in your commitment letter has been satisfied or properly waived: tax accounts confirmed, status certificates reviewed on condominium files, and any lender specific requirements completed. The commitment is your deal. The lawyer's job is to make sure the closing matches it.
The bottom line
Funding a private mortgage is not a paperwork exercise. It is a structured risk review, and every step exists because a lender somewhere lost money when that step was skipped. If you are lending privately in Ontario, work with a lawyer who runs this process on every file, every time.
At FBW LLP, our lender side practice acts for institutional and private lenders across Ontario on origination, funding, and enforcement.
Contact us to discuss your next transaction.