Payoff letter

When a business with a secured loan is sold and the loan is to be repaid out of the sale proceeds, the payoff letter tells the buyer, the seller and their lawyers how much to send and what the lender will release. Check that its amount matches the funds flow statement.

What the personal property security statutes provide

Ontario’s Personal Property Security Act, section 18, lets a debtor, a judgment creditor, a person with an interest in the collateral or the authorized representative of such a person require the secured party, by written notice containing an address for reply, to give a written statement of the amount of the indebtedness and the terms of payment as of the date specified in the notice, subject to the exceptions and charges the section sets. British Columbia’s Act, section 18, gives the debtor, a creditor, a sheriff, a person with an interest in the debtor’s personal property or an authorized representative a comparable written demand. Other provinces have their own laws, so check the one that governs the lender’s security.

What to ask the lender

• The amount as of the closing date and any daily amount after it
• Which registrations and security the letter covers
• Who will register the discharge, and when it will do so
• Whether a personal guarantee is released on payment

The unresolved lien answer covers what happens if the discharge is late.