Foreclosures in Canada

 

While in a perfect world, we would never have any shortcomings, sometimes in life, things happen which can make things very difficult. The loss of a job perhaps, or intentional non-payment of mortgage arrears due to marital shortcomings or other personal calamities, make a foreclosure procedure possible.

This should in no way affect your decision on whether or not to buy a home now. If you are relatively secure and stable, at the end of the day, if you find yourself in a catastrophic situation, it won't matter much if you are currently renting or if you own. You'll still have to some to some sort of resolution to a situation to that dilemma if the time comes. At least if you've purchased a home, you will probably have accrued some equity in your home by way of a mortgage reduction, and in addition, your home may well have increased in value. These factors will at least buy you a little time should you find yourself in dire circumstances. Your other alternative is to rent. This option will give you absolutely no comfort when the landlord comes knocking on your door with another rental increase.

I'll attempt here to explain the foreclosure process in some detail. In this outline, the word "Mortgagor" can be replaced with the word "Borrower", and "Mortgagee" with "Lender", for clarity purposes.

STATEMENT OF CLAIM

An action for foreclosure is commenced firstly by a Statement of Claim by the lender, in a manner and form as set forth in the Rules of the Court. An action for specific performance of an Agreement for Sale is also commenced by Statement of Claim with the form also set forth in the Rules of the Court.

The defendants to be named in the Statement of Claim for foreclosure are the registered owners of the property, any person in possession of the mortgaged property, and any persons having rights of dower.

Prior encumbrances need not, nor should they be, included as parties defendant to the action for foreclosure in that the action for foreclosure does not affect their interest in the land. Subsequent encumbrances are not to be named as parties to the action, and the first notice which they receive would be service upon them of the Order Nisi (Order for Sale) or Order for Specific Performance. The relief asked for in the Statement of Claim is:

A declaration as to the amount owing under the said mortgage with interest according to the terms of the said mortgage and, in default of payment, sale or foreclosure and possession of the said lands.

An order for possession

An appointment of a receiver

Such other relief as to the Court may seem just

Costs of the action

A shortening of the period of redemption

In addition, it is important to note that a mortgage action may be commenced and the place of trial may be in a judicial district other than where the land is situated.

APPLICATION FOR ORDER NISI (ORDER FOR SALE)

It is rare that a mortgagor in default will file a statement of defense. The normal course is for the mortgagee to either receive a demand of notice from solicitors representing the mortgagor, or at the expiration of 15 days after service of the Statement of Claim the mortgagee will be in a position to note the mortgagor has been able to note the mortgagors and other defendants in default. 

The next step in the action will, therefore, be a Court application before the Master in Chambers for an Order Nisi, in the case of a mortgage foreclosure, or for a Specific Performance in the case of an action on an Agreement for Sale. Such an application may be exparte 1 unless the mortgagee is requesting a reduction in the period of redemption, and then in that case, notice of such application must be given to the defendant. In any event, supporting documentation will be:

an affidavit of default which provides evidence to the Court as to the balance presently due and owing to the mortgagee under the terms of the mortgage;

an affidavit of value, which is normally prepared by a qualified real estate appraiser, and which provides the Court with evidence as to the value of the land which is under foreclosure;

a certified copy of title and general registry certificate from the Land Titles Office which provides evidence as to claims against the property which may be prior to the claim of the plaintiff mortgagee (i.e. tax arrears, builders liens, writs of execution or prior mortgages).

Section 42 of the Law of Property Act provides that in the case of urban lands the period of redemption shall be six months from the date of the granting of the order. The Court however, does have the authority to reduce this period of redemption. On applications for a shortened redemption period, the Court is normally concerned with determining the equity position of the mortgagor in default. Therefore, and applicant must provide evidence as to the amount of the arrears under the mortgage together with the total value of encumbrances registered against the property, and the value of the property in order that the Court may determine the equity held by the mortgagor in default.

Generally, if the Court is satisfied that either the mortgagor or subsequent encumbrancers have no equity in the property, or if the property has been abandoned, and the mortgagees security is being wasted, a shorter period of redemption will be granted.

NOTICE OF INTENTION TO ADVERTISE

At the expiration of the redemption period, a notice must be served upon the defendant by the plaintiff advising that unless the defendant applies to the Court for an order postponing the sale of the land, the plaintiff will within 10 days advertise the land for sale pursuant to the terms of the Order Nisi (Order for Sale).

ADVERTISING

At the expiration of the 10 day period, the property is advertised in accordance with directions of advertising, given to the mortgagee by the Clerk of the Court. If tenders are submitted pursuant to the directions which are published, and if these tenders are acceptable an application is made to accept the tender and vest title in the name of the successful tenderer. If there are no tenders or no acceptable tenders, the application by the mortgagee is for a Final Order for Foreclosure.

APPLICATION FOR FINAL ORDER

The application for an order confirming sale or for a final order for foreclosure must be made within 15 days after the date set for reception of tenders. The application is again by way of notice of motion served on all defendants and all subsequent encumbrances, and is supported by a final affidavit of default which merely updates the affidavit of default which was filed in support of the application for the Order Nisi. The application is also supported by an affidavit proving publication in accordance with the terms of the directions for advertising granted by the Clerk of th Court, together with an affidavit setting forth the tenders which have been received and the details of those tenders. If tenders have been submitted, copies of the Notice of Motion and supporting documents must also be served on the tenderers as they are entitled to notice of the application dealing with the tenders which they have submitted. In addition, a new certified copy of title and general registry certificate will be obtained in order to show that additional charges have been registered against the title during the redemption period.

On an application for a Final Order for Foreclosure, the Court is interested in determining what efforts if any, have been made by the mortgagor to redeem his mortgage during the redemption period. The Court is also interested in determining the equity which is enjoyed by any party in the property and in knowing the value of the property which is under foreclosure. Whether or not there is equity at this stage of the proceedings, a Final Order for Foreclosure will likely be granted if there is no representation made by the mortgagor, and if it can be shown that persons having equitable interest in the property have not shown any interest in the foreclosure proceedings throughout.

In the event that tenders are submitted and are unsatisfactory to the foreclosing mortgagee, the application will also be for a Final Order for Foreclosure or for an Order Determining an Agreement for Sale. In addition to the information normally placed before the Court in the event that no tenders are received, the Court on this type of application is interested in why the mortgagee is refusing to accept the tenders that were submitted. The normal answer to this question is that no tender submitted is sufficient to cover the mortgagee's claim at costs.

While I strives to keep the information on this site accurate and current, I cannot guarantee the complete accuracy, completeness, or timeliness of this information. You should consult legal advise for the latter.

Ex Parte

- Lat. 'By or for one party' or 'by one side.'

Refers to situations in which only one party (and not the adversary) appears before a judge. Such meetings are often forbidden.

Although a judge is normally required to meet with all parties in a case and not with just one, there are circumstances where this rule does not apply and the judge is allowed to meet with just one side (ex parte) such as where a plaintiff requests an order (say to extend time for service of a summons) or dismissal before the answer or appearance of the defendant(s).

In addition, sometimes judges will issue temporary orders ex parte (that is, based on one party's request without hearing from the other side) when time is limited or it would do no apparent good to hear the other side of the dispute. For example, if a wife claims domestic violence, a court may immediately issue an ex parte order telling her husband to stay away. Once he's out of the house, the court holds a hearing, where he can tell his side and the court can decide whether the ex parte order should be made permanent.

The above information is provided as a guideline only and is not intended to give legal advise. Please consult your solicitor for his/her opinion on your own particular situation.

Posted by N. Smith

From http://www.calgarymike.com/foreclosure.html

Bob Sheddy

Bob Sheddy

Broker of Record
CENTURY 21 PowerRealty.ca
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