REAL ESTATE FORECLOSURE PROCEDURE
FOR THE
Foreclosure and sale by Public Auctions is the remedy used in
The summary at the end of this page sets out the approximate number of days required for each step in the proceedings, the instructions and documentation required to execute that particular step. I have also indicated the number of days required to complete each requirement and the time period between successive steps in the foreclosure proceeding. The time periods are indicative of the time required in a normal foreclosure proceeding and do not include other action which may be necessary, such as having to make an application for substituted service in the event that the borrowers cannot be located.
It is possible to proceed more quickly under favourable circumstances. If difficulties are encountered with obtaining descriptions of the property, obtaining personal service of the defendants, or in dealing with a property located in a rural area, somewhat longer time periods than normal may be required to complete the foreclosure. In order for a lender to proceed to foreclose the borrower must be in default under the terms of the mortgage security.
Courts in
For those loans in default for which no quick contractual remedy is available due to subsequent encumbrances on title, such as other mortgages, judgments or mechanics' liens, the lender's only remedy may be to proceed to foreclosure and sale. In some circumstances where the borrower is prepared to be cooperative and where no Judgments and no other encumbrances are registered against the property, it may be possible to obtain a Quit Claim Deed to transfer title to the property to the mortgage holder. This method saves additional interest, the costs associated with the foreclosure and allows the mortgage holder quicker title to the Property.
INITIATING FORECLOSURE PROCEEDINGS
The foreclosure procedure is usually initiated by the issuance of a registered demand letter from the lender's solicitor to the borrower demanding payment in full of the arrears or the settlement with the lender within a specified and reasonable time frame, generally ten (10) days. If no response is received to this demand within the required time frame, the solicitor then commences the foreclosure action.
The Civil Procedure Rules of Nova Scotia require that if the Mortgage upon which the lender is foreclosing, is a second mortgage, then the consent of the first mortgage holder must be obtained. This Consent must be in writing from the 1st mortgage holder, and it generally contains certain conditions upon which the first mortgage holder is willing to consent. These conditions may vary, but generally are a combination of the following:
(a) That the mortgage holder shall pay to the first mortgage holder all arrears of installments of principal and interest presently due and owing on the first mortgage;
(b) That mortgage holder shall pay to this first mortgage holder all installments of principal and interest owing under the first mortgage as they become due and payable pursuant to the terms and conditions of the first mortgage throughout the duration of the intended foreclosure proceeding;
(c) That mortgage holder shall guarantee to the first mortgage holder that should the lands being foreclosed upon, be sold for less than the balance of the first and second mortgage, then all sums due and owing to the first mortgagor holder, inclusive of costs on a solicitor/client basis shall be paid in full;
(d) That mortgage holder shall proceed expeditiously with the intended foreclosure;
(e) That the first mortgage must be paid out in full immediately upon the commencement of the foreclosure and the first mortgage shall assign its rights to mortgage holder.
(f) That the first mortgage holder shall be paid the full balance of principal, interest, and costs within Twenty (20) days of the date of the Sheriff Sale;
The formal foreclosure actions is commenced by the issuance of an
Originating Notice (Action) and Statement of Claim, this being a civil suit by
the mortgage lender, against the borrowers to foreclose the borrowers' equity
of redemption. The Statement of Claim sets out the details of the mortgage
loan, the amount claimed and the amount of default. After the issuance of the
Originating Notice (Action) and Statement of Claim, the defendants must be
served personally with a filed copy of both the Originating Notice (Action) and
Statement of Claim. If no Defence is filed within twenty
(20) days after this personal service of documents then an application is made
to the Supreme Court of Nova Scotia for and Order for Foreclosure and
The Application for an Order for Foreclosure and
After the granting of the Order, the date for the
Before the date appointed for the sale, the mortgage holder will be
contacted to determine what will be acceptable as a minimum bid, to ensure, if
interested parties bid at the
In the computation of the amount due, reference is made to the Order for
Foreclosure and
At the sale of the property, bids are received by the Sheriff in much the same manner as that of an auction. Should no bidders show to bid, the property will then be purchased by the mortgage holder for the aggregate of the Sheriff's fees and disbursements plus real estate taxes and interest, if any, as may be outstanding at the date of sale. This amount will be required for the sale to be paid to the Sheriff at the time of the sale.
In the event that no bidders or other purchasers show up at the sale and the mortgage holder purchases the property, the property can then be listed for sale on the open market, this can be done before the completion of the balance of Foreclosure documentation and an Order confirming sale.
In the event that Notice of Sale has attracted interest buyers and the property is sold to one of them, then the successful bidder must present a deposit of ten percent (10%) of the total sale price which will be required by the Sheriff on the conclusion of the sale. The successful bidder/purchaser is allowed twenty (20) days to arrange the necessary financing and conclude the transaction.
Following the sale, the solicitor for the lender will then prepare a Sheriff's Deed, conveying the property to the purchaser, which, along with a Sheriff's Report, will be forwarded to the Sheriff for execution. When the Sheriff's Deed and Report are returned by the Sheriff's Office, application is then made to the Court for an Order to confirm the Foreclosure Sale. This application is made by way of Interlocutory Notice along with a Solicitor's Affidavit stating that the terms of the Order for Foreclosure and Sale have been complied with, that the Sheriff's Report and all other documentation have been executed and that the sale should be confirmed and ratified.
While certain documents have to be completed to confirm the Foreclosure Sale, it should be noted, that, there are two alternatives to consider at the conclusion of the foreclosure proceeding, these are namely:
1. The confirmation of the foreclosure proceeding without deficiency judgment against the mortgagors as all sums due and owing have been received. This is the case where third party bidders have paid at least all sums outstanding to the lender.
2. Confirmation of the foreclosure proceedings with a deficiency judgment where the lender has not realized all sums due and owing. In this case an application for deficiency judgment against the borrower should be made within six months from the date of the confirmation of the foreclosure and sale.
Although defenses are rarely encountered in a foreclosure action, the filing of a defence by a defendant may result in a application for Summary Judgment and/or being set down on a contested proceeding for trial following the usual procedures of Discovery and the availability of court time. The time required for a contested trial hearing and the costs involved are highly variable and would depend on the particulars of each individual case.
It is also possible that an objection may be made by the borrower at the time an Application is made for a Deficiency Judgment, notwithstanding that a Defence was not filed earlier in the proceedings. In this event, the right of the mortgagee to a deficiency is usually determined by court application rather than by the trial process.
The courts will generally not permit a deficiency judgment to be entered against the borrower until such time as the lender has exhausted all of its remedies including the sale of the subject property to a third party. The reason for this is that the courts are wary of lenders, who, having purchased the Property at sale, turn around and sell it to an interested third party for considerable less than its market value. The lender would then seek a deficiency based upon the loss it has incurred inflated by the difference for which the property has sold at market value. The courts are not prepared to entertain this type of activity and will require that a lender demonstrate that it has used its best efforts to obtain the best price possible and only after having examined and approved the lender's effort as being bona fide, will the Courts permit the entry of a deficiency judgment against the borrower.
Foreclosure and sale proceeding are not without cost to the mortgage holder. An estimate of fees and disbursements in an uncontested foreclose as of April,1999 would be approximately as follows:
1. Estimate of fees - $1,750.00
2. Estimate of disbursements - $1,600.00 - $2,000.00
(**note - estimates do not include H.S.T.)
From these amounts the lender can recover under the provisions of the Costs and Fees Act, to be charged to the borrower's account, approximately Three Thousand Dollars ($3,000.00); thus costs to the lender in an uncontested foreclosure action will be the difference between those which are recoverable under the provisions of the Costs and Fees Act and the fees and disbursements actually incurred. The charges incurred and permitted under the Cost and Fees Act are added to the price to be sought by the lender on disposal of the Property and on any deficiency which the borrower may bring to seek full repayment of moneys due.
CONCLUSION
I trust that this brief outline will assist you in appreciating the procedures involved in Foreclosure Proceeding in the Province of Nova Scotia. I would be pleased to answer any queries you may have in connection with this matter.
Days
Elapsed
Instructions
and
Reporting to
Days to
Steps in
Proceeding
Documents Required
Client
Complete
(based on 10 day
Demand Letter)
0
Demand Letter
(optional)
Instructions re arrears
Yes
2
12 Response to letter None Yes 10
17
Issuance of Originating
Instructions to
Foreclose
Yes
5
Notice and Statement
of
original of mortgage,
Claim
detailed
long form
statement of account
22
Service of
Originating
None
Yes
5
Notice and Statement of
Claim
32
Default period for
filing
None
Yes
20
Defence
36
Application for Foreclosure Attendance of
mortgage
Yes
4
order and setting
down
officer to swear affidavit
for sale.
70
Advertising for sale
None
Yes
20
and notices to
subsequent encumbrances
76
Sheriff's
Sale
Bidding
instructions,
Yes
1
receipt of funds
necessary to purchase
A. CONFIRMATION WITHOUT DEFICIENCY JUDGMENT REQUIRED
In the event the Property is sold at foreclosure for greater than the lender's costs or is sold subsequent to sale for a sum greater than the lender's costs:
STEP DOCUMENTS
DAYS TO COMPLETE
Property sold
to No
instructions,
20 (purchaser has 20 days to
3rd party,
sum
required,
Sheriff's
complete)
realized
greater
Deed and Sheriff's
than
outstanding Report
Confirmation
None
7-10 after sale has been
Application
concluded.
B. CONFIRMATION WITH DEFICIENCY JUDGMENT
Property
purchased No
instructions,
4-5 (to obtain
by
mortgagee
require Sheriff's
Sheriff's Deed)
Deed and Sheriff's
Report
Property
purchased Instructions
minimum
20
by 3rd party
-
calculation of
sum received
not
deficiency
sufficient
to
instructions
pay out
mortgage
deficiency
account judgment
Confirmation
Instructions
minimum 15
Application
deficiency
maximum 6
application with-
month (depends
in 6 months
-
on when
2 appraisals of
application for
property required
deficiency
if property
is made)
purchase by
mortgagee
Note: the information and material provided is for information
purposes only and is not intended to be a definitive statement of the law, nor
should it be relied upon for legal advice. Each situation has its own peculiar
circumstances to consider which may require in-depth review and considerations
and the appropriate advise thereto. Always discuss
important business decisions and have the documentation reviewed by your lawyer
before signing.