How Foreclosure Works in Alberta: Steps From Default to Sale

If you have missed mortgage payments and received a demand letter, the next steps can feel like a black box. In Alberta the process is public, follows set stages, and gives you chances to respond before anything final happens.

This article walks through the court process in order, from the Statement of Claim to the final sale. Your own situation may differ, especially if your mortgage is insured, was given by a company, or is on farm land, so treat this as a general map and not a prediction.

This article covers the law of Alberta.

Why foreclosure in Alberta goes 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. A lender's right in an action on a land mortgage is restricted to the land the mortgage relates to, and the Act does not give the lender a separate non-court power of sale route, so enforcement runs through a court action.

There are exceptions. Sections 40 and 41 do not apply to a mortgage given by a corporation, so a corporate borrower gets no statutory six-month period or sale-first protection. They also do not apply to National Housing Act mortgages or certain insured high-ratio mortgages. A lawyer can confirm which rules apply to your mortgage.

The steps, in order

• Statement of Claim: the lender starts the action and must serve the claim on you within one year after it is filed; the Court may extend that, but not by more than 3 months.
• Your response: the time to file a statement of defence is 20 days if you are served in Alberta, one month if served elsewhere in Canada, and two months if served outside Canada.
• Default or notice: if you file neither a statement of defence nor a demand for notice, the lender must note you in default before applying for personal judgment or certain remedies. If you do file one, you are entitled to notice of the lender's applications.
• Preparing the application: before asking for a redemption order or foreclosure order, the lender must file an affidavit of value, unless the Court orders otherwise, and certified copies of all current titles to the land.
• Order nisi (redemption order): the order fixes a redemption period, which is 6 months from the date the order is granted for land other than farm land and one year for farm land, and provides that if you do not pay as ordered the land is to be offered for sale.
• Sale or other result: the Court sets how the land is offered, and if a sale fails it may order the land offered again or make a vesting order.
• Final accounting and order: the lender files and serves the statement of secured indebtedness, sale proceeds, any deficiency calculation, bill of costs and proposed order, and an assessment officer checks the amounts.

Foreclosure matters may be heard by Applications Judges in Court of King's Bench chambers.

The redemption period

The redemption period fixed in the order is 6 months from the date the order is granted for land other than farm land, and one year for farm land. The Court may decrease or extend it. For non-farm land it can look at your ability to pay, the value of the land, whether it has been abandoned, the value of the lender's security, your earning capacity, and whether the missed payments were caused by temporary or permanent unemployment or other conditions beyond your control.

The redemption period rules do not apply to an order that you have consented to. Before agreeing to anything, it is worth understanding what you would be giving up.

Sale, vesting and the end of the process

If the redemption period passes without payment, the land is offered for sale at a time and place the Court sets. The Court may offer it at a time and place, in a manner and at a price it considers appropriate. In some cases, such as where land was abandoned or is undeveloped non-farm land, the Court can make a vesting or cancellation order without first offering the land for sale.

An order of foreclosure, once made absolute, vests title in the lender free of your right of redemption, satisfies the debt, and entitles the lender to a certificate of title.

What about a shortfall?

On an ordinary individual's residential mortgage, the lender generally cannot sue on the covenant for payment, and the Act bars an action on that covenant against an individual transferee of mortgaged land. These protections apply only to residential land and farm land.

There are important exceptions. A guarantor, surety or corporate co-borrower can still be pursued for a shortfall. The protections do not apply to an individual who is or was a registered owner of residential land if neither the individual nor any member of the individual's family ever used the land as a bona fide residence while the individual was registered owner, such as an investment or rental property, and you carry the onus of showing you are not excluded. For National Housing Act or insured high-ratio mortgages, the lender may sue on the covenant.

What to do next

• Do not ignore court papers; note the date you were served and the deadline to respond.
• Gather your mortgage, any guarantee, recent statements, and your demand letter.
• Decide with advice whether to file a statement of defence or a demand for notice so you receive notice of applications.
• Ask a lawyer whether your mortgage is insured, corporate or on farm land, because that changes your protections.
• Keep records of your income and any hardship, since the Court may consider these when setting the redemption period.

Frequently asked questions