In the recent Rowatt case, the Ontario Court of Appeal reminded lenders that they should be very careful when taking a guarantee from a borrower’s spouse. In Rowatt the husband had taken out a loan to finance his mortgage investment business. Mrs. Rowatt signed a guarantee of her husband’s loan and a collateral mortgage on the matrimonial home which was registered in her name. The guarantee and mortgage were later replaced with a conventional mortgage for a higher principal amount. Mr. Rowatt went bankrupt. When Mrs. Rowatt eventually stopped making payments on the conventional mortgage, the lender sued to enforce the mortgage. At trial, the court said that the lender could enforce the mortgage against Mrs. Rowatt.

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