What Is a Judicial Sale in Alberta and How Does It Work?

If you own a home in foreclosure, or you are thinking of buying one, a judicial sale is the stage where the property is actually sold under the Court's control. It works differently from an ordinary listing, because the Court has to approve key steps.

This article explains in plain terms how a court-supervised sale is set up, priced, approved and closed in Alberta, and what each person involved should watch for.

This article covers the law of Alberta.

What a judicial sale is

In Alberta, enforcement of a land mortgage runs through a court action, and the Law of Property Act does not give the lender a separate non-court power of sale route. 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. That court-ordered sale is what people usually call a judicial sale.

The order nisi also fixes a redemption period, which is 6 months from the date of the order for land other than farm land, and one year for farm land. The Court may decrease or extend that period. The period does not apply to an order the debtor has consented to, and these protections do not apply to enforcement of a mortgage given by a corporation.

Some cases skip the sale step. The Court can make a vesting or cancellation order without first offering the land for sale where the land was transferred or sold while in default, was abandoned, or is undeveloped non-farm land.

How the property is listed and priced

The Court may offer secured 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 the lender applies for an order that property be offered for sale, an affidavit of value must be filed, although the Court can order otherwise.

Before applying for a redemption order or foreclosure order, the lender must also file a certified copy of all current titles to the land, plus a current Personal Property Registry search if chattels are included. These matters may be heard by Applications Judges in Court of King's Bench chambers.

The details differ from case to case, so the order itself is the best guide to what applies. The Court of King's Bench posts template orders, including posting, listing, condominium and advertising variants.

Approval and closing

• Tenders: where tenders are filed in Court, the lender applies for an order confirming the sale or rejecting tenders, with the hearing not more than one month after the date set for receipt of tenders.
• Registration: the confirming order directs the Registrar of Land Titles not to register it without evidence of payment, unless the order says otherwise.
• Sale to the lender: the Court must consider whether a public sale should be attempted first, and if the lender made no offer or its tender was rejected, the Court determines the fair value at which the lender may purchase.
• Failed sale: the Court may order the land offered again or make a vesting order.

An order confirming sale is one of the applications for which an affidavit of value must be filed.

The accounting after the sale

Before the final order is entered, the lender files and serves the 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, and the certified bill of costs is served on every defendant and subsequent encumbrancer.

The Court of King's Bench publishes a Foreclosure Fee and Disbursement Guideline setting the legal fees and disbursements that may be claimed in foreclosure actions. The sale price and these costs together affect whether there is any shortfall.

On an ordinary individual's residential mortgage, the lender generally cannot sue on the covenant for payment. A guarantor, surety or corporate co-borrower can still be pursued for a shortfall, and the protections do not apply to an investment or rental property that was never used as a residence. Mortgages given to secure a loan under the National Housing Act (Canada), and insured high-ratio mortgages, are also an exception, and for these the lender may sue on the covenant. Whether any of this applies to you depends on your situation, so it is worth confirming with a lawyer.

What to do next

• Homeowners: read the order for the sale method, dates and any listing terms, and keep the property secure and maintained.
• Homeowners: ask a lawyer whether to seek an extension or postponement before the sale proceeds.
• Buyers: ask for the order, the terms of tender or listing, and the conditions for confirmation and payment.
• Buyers: have a lawyer check titles, other registered interests and what the order says about registration.
• Everyone: keep the date of each hearing and the deadlines for filing in your calendar.

Frequently asked questions