The Foreclosure Process in BC

Foreclosure is a complex process. Most of us have heard of foreclosures, but few of us truly understand the entire process. This page has been designed to reveal the mystery of the foreclosure process in BC from start to finish.

Foreclosure in Detail

The petitioner (the one that begins foreclosure proceedings) or any of the respondents (those holding mortgages such as 1st, 2nd, 3rd, etc) can apply for a judicial sale, also known as a court-ordered sale (or a foreclosure). The purpose of a foreclosure is to end the borrower's equitable right to redeem.

In BC, foreclosures are initiated with a Demand Letter to the borrower. This letter accelerates the mortgage and gives the borrower a short amount of time to pay out the mortgage. Failing repayment, a petition is filed in BC Supreme Court. This results in an Order Nisi from the court which establishes the amount the borrower must repay, as well as in what timeframe (usually six months).

At one time judicial sales were conducted by public auction. This is no longer the case. Today, the court either orders the property sold through a private sale, or the property is appraised and listed for sale with a real estate company.

At this point, the petitioner may make an offer on the property (with the approval of the court). Should the sale take place, and the proceeds are not enough to pay off the mortgage and the costs of the sale, the petitioner can sue on the personal covenant to recover the difference. This can happen even though the petitioner may later sell the property for a profit.

The court decides upon the terms and conditions of the sale. Every offer to purchase the property must be made subject to the court's approval. The court will review an offer and accept or reject it. Once the sale has taken place, the mortgages and other charges are paid off according to their priority and the borrower will receive any moneys remaining.

Steps in a Foreclosure

Demand Letter

A letter accelerating the loan and giving the borrower a short period of time to pay out the mortgage or else face foreclosure.


Petition

Filed in B.C. Supreme Court registry. The lender is the petitioner, while the borrower and all other charge holders whose interests rank in priority behind the lender, are the respondents.


Order Nisi

The first order of the court. It establishes, amongst other things, the amount required to redeem the mortgage and the time period given to the borrower to redeem.


Judicial Sale

The petitioner may choose to have the property listed for sale by the court. Unless special circumstances exist, the petitioner only seeks this order at the expiry of the Redemption Period (Traditionally 6 months).


Order Approving Sale

The court approves the sale of the property. If the sale proceeds do not pay the petitioner in full, the petitioner will seek the deficiency from the respondent borrower under a court action.

Order Absolute of Foreclosure

If the redemption period has expired and if:

  • the property is worth the same amount as the mortgage debt or more;
  • the respondent borrower is judgment-proof (i.e., no assets or money to apply towards a deficiency); or
  • there are no offers under a judicial sale; the petitioner can seek an absolute order of foreclosure, under which the petitioner becomes the new registered owner and all respondents are wiped off title. No further action can be taken against the respondent borrower after the court has granted the order absolute.

This chart has been reprinted with permission from the UBC Sauder School of Business, Real Estate Division


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