Process in Canada

[Ram Srinivasan]

Hi Canadian BPs

For Judicial sale Foreclosures (I am in Alberta), can anyone advise step by step on how the foreclosure process works? Even if you can direct me to some trustworthy links, I would appreciate it!

Thanks,

Ram

[Roy N.]

@Ram Srinivasan

I set out to answer you this morning, but BP suddenly decided I was an unverified user and would not permit me to post .... Josh & Brandon must be trying to send me a message ;-)

Alberta is among the half of Canadian provinces which uses judicial foreclosure when a mortgage is in default.   The process is very much like that which you read about here on BP for many U.S.A. states.

When the mortgage goes into default and, after the lender and owner have exhausted any other options, the lender will begin the foreclosure process to take possession of the property.

1) In Alberta, the conventional first step will be for the lender's attorney to send a "Demand Letter" to the mortgagor advising them foreclosure proceedings are to commence.

2) If the mortgagor failed to pay the arrears as instructed in the Demand Letter, the lender's attorney will next serve the mortgagor with a Statement of Claim.  A Statement of Claim outlines why the bank is asking the Court’s permission to foreclose on the property.  The mortgagor has 20 days to respond.  If no response is made, 

3) In Alberta, the mortgagor may respond to the Statement of Claim in one of five ways:

a) Ignore the fact they are being sued. This is generally a very poor idea.  The mortgagor will be Noted in Default, and the lender will be able to proceed in the foreclosure without further notice to the mortgagor of any steps in the legal action they take.  Foreclosure and judgment can occur in days.

b) The mortgagor can negotiate a Quit Claim. This is surrendering title of the property to the lender.  The Courts will require a Certificate of Independent Legal Advice before they will approve the process. This is a drastic step that does require the services of a lawyer. It also means the mortgagor will be required to surrender any equity in the property.

c) The mortgagor can file a Demand of Notice.  People who have no equity (or financial value) in their property and who have no hope of ever getting the mortgage caught up or paid out may want to file a Demand of Notice with the courts.  That will require that the lender’s attorney keeps the mortgagor advised of any court applications they are taking in the foreclosure lawsuit.  This approach will result in increased costs against the mortgagor, but will provide the opportunity to ensure that all of the steps were properly taken and to dispute any problems that might arise in Court.

d) The mortgagor can file a Statement of Defence.  Filing a Statement of Defence implies the mortgagor fully intends to defend the lawsuit, and contains reasons why the lender is incorrect in suing you.  For example, they may have named the wrong party or the amount they are suing for is grotesquely incorrect.  Choosing this route requires the mortgagor participate in each step of the lawsuit and can result in a huge legal bill in addition to the outstanding mortgage costs.  That will in turn dramatically increase the judgment of any judgement against the mortgagor.  One should be very certain the lender is incorrect in a major way before choosing this route.

e) The mortgagor can negotiate a Consent Order for Foreclosure. The Court will require that a Certificate of Independent Legal Advice being attached to the Order before they will accept it.  If the mortgagor has equity remaining in the property (over and above all amounts due the lender), but cannot make up the arrears, a lawyer may be able to negotiate a longer period of foreclosure.  This would provide the mortgagor an opportunity to find a private buyer, rather than face a court ordered auction.

4) If the mortgagor is Noted in Default, the lender will net apply to the court for an Order Nisi.

5) Once the court has issued an Order, the mortgagor is entitled to a Redemption Period - typically six months for urban properties (agricultural land is different).  Note that the Court may shorten this period if there is sufficient evidence that the mortgagor, or any subsequent encumbrances, has no equity in the property.

6) Court Ordered Sale:  Once the Redemption Period has elapsed, the court will decide on an order directing the sale or other means of disposing of the property.

The foreclosure process in Alberta differs in comparison to other provinces, in that it is the court that decides to whom the foreclosure property will be sold, and for what price. Once the previously mentioned redemption period has expired, the court can sell the property at any time, for any price they choose. If the foreclosed party is unable to pay off all of the financial obligations after the redemption period, then the mortgage lender will be able to foreclose on the property and list it under MLS Realtor. Once this is done, the foreclosed property is then available to be auctioned to the public.

Whether it is a bank or a 3rd party that becomes the owner of the property, they will usually be entitled to possession within 30 days. This means that is the owner or or a tenant lives in the property, the tenant will be served with an order requiring them to move within 30 days.