Can Your Lender Buy Your House in an Alberta Foreclosure?

If you have fallen behind on your mortgage, you may have heard that the bank can simply sell your home or keep it. In Alberta, it is not that simple. The lender has to go through the court, and the court has a say in how the property is sold and whether the lender can buy it.

This article explains in plain terms how a sale, a lender purchase and a final foreclosure order fit together, and where you can speak up. Your own situation may differ, so treat this as a general guide and confirm the details with a lawyer.

This article covers the law of Alberta.

The lender must go through the court

Foreclosure of an Alberta mortgage is governed by Part 5 of the Law of Property Act together with the Alberta Rules of Court. Under section 40(1) of the Act, a lender's right in an action on a land mortgage is restricted to the land the mortgage relates to, through sale or foreclosure.

In practice, that means the steps toward a sale or a foreclosure order are taken in a court action under Part 5 of the Act, and the court supervises them. Foreclosure matters may be heard by Applications Judges in Court of King's Bench chambers. How all of this applies to your mortgage depends on your situation, so it is worth confirming with a lawyer.

Sale first, then other options

In an order nisi, the court must provide that if the defendant does not pay as ordered, the land is to be offered for sale at a time and place the court sets. If the sale fails, the court may order the land offered again or make a vesting order.

The court may offer the property for sale at a time and place, in a manner and at a price it considers appropriate. If listing with a realtor is ordered, an approved listing agreement is attached to the order. Before applying for an order that the property be offered for sale, the lender must file an affidavit of value, although the court can order otherwise.

The court can skip the sale step in some cases. It may make a vesting or cancellation order without first offering the land for sale where the land was transferred or sold while in default (or within 4 months before default), was abandoned, or is undeveloped non-farm land.

When the lender wants to buy

A lender that wants to purchase the property is dealt with under Rule 9.33 of the Alberta Rules of Court. Before a sale to the plaintiff, the court must consider whether a public sale should be attempted first. If the plaintiff made no offer or its tender was rejected, the court determines the fair value at which the plaintiff may purchase the property.

Where tenders are filed in court, the plaintiff applies for an order confirming the sale or rejecting tenders. The hearing is scheduled not more than one month after the date set for receiving tenders. Before the final order is entered, the lender must file and serve its statement of secured indebtedness, the sale proceeds, any deficiency calculation, a bill of costs and a proposed order. An assessment officer checks and corrects the amounts.

Foreclosure orders and your right to speak

Once an order of foreclosure is made absolute, it vests title in the lender free of your right of redemption, satisfies the debt, and entitles the lender to a certificate of title. Before the lender applies for a foreclosure order, it must file certified copies of current titles and an affidavit of value.

• You can ask the court to postpone the day fixed for redemption at any time before the land is sold under an order for sale.
• If you file a statement of defence or a demand for notice, you are entitled to notice of every application the lender makes.
• If you do neither, the lender must note you in default before applying for personal judgment or certain remedies.
• The usual redemption period is 6 months for non-farm land and one year for farm land, and the court may shorten or extend it.

If a judge postpones the redemption day, an appeal is allowed only on the ground that the judge's discretion was not exercised judicially.

Exceptions that change the protections

Any waiver or release of the section 40 protections is void. Whether an exception applies to you depends on who signed the mortgage and how it was insured, so check your documents.

What to do next

• Read every court document you receive and note the deadlines. A statement of defence is due in 20 days if you were served in Alberta.
• Decide with a lawyer whether to file a defence or a demand for notice so you receive notice of applications.
• Gather your mortgage, any insurance details, and information about who signed.
• Ask a lawyer whether to seek a postponement of the redemption day or a different redemption period.
• Do not sign a consent order until you understand what protections you give up.

Frequently asked questions