The foreclosure process in Alberta is very similar to the process in British Columbia, as foreclosures are also processed under judicial sale. However, the court ordered sale is carried out under the Court of Queen’s Bench. The following article breaks down the foreclosure process for farmland in Alberta, which does bear differences to the process on other type of property.
There are two kinds of mortgages used in Alberta. The first kind is a Land Titles Act Mortgage, which has to be used in accordance with the terms of the Land Titles Act. The Act outlines the requirements of each mortgage, and provides the form of mortgage that has to be used. When a creditor lends money to a farmer and takes this kind of mortgage, the mortgage is usually registered against the certificate of title for the specific land, which the farmer agreed to give as security. The registrar endorses the back of the certificate with the word "mortgage", a registration number and the date of registration.
The second kind of land mortgage used in Alberta is an Equitable Mortgage. It is just as valid and enforceable as a Land Titles Act mortgage. When a farmer is a registered owner of land, a duplicate certificate of title for this land is prepared as well as the original. The duplicate certificate of title can be taken out of the land titles office. An equitable mortgage is created when the farmer gives the duplicate certificate of title to a creditor as security for a debt. The creditor can also register the mortgage by filing a caveat against the farmer's certificate of title for the land.
If the farmer defaults under the terms of the mortgage contract, the creditor is entitled to recover its debt from the mortgaged land. To enforce a mortgage, the foreclosure procedure that a creditor must follow is complex and varies depending on the situation. The situation is the same for both Land Titles Act Mortgages and Equitable Mortgages.
The process first usually involves the creditor sending a demand letter to a farmer asking for the total amount owing to be paid within a few days or weeks, together with a notice from the creditor under the Farm Debt Mediation Act and in certain situations, a Notice of Intention to Enforce Security under the Bankruptcy and Insolvency Act. The letter usually states that if the debt is not fully satisfied by a specific date, legal proceedings will be taken to recover the money. Sometimes the proceedings start immediately - sometimes they do not. The decision to proceed is entirely within the creditor's power. When a Notice to Enforce Security under Bankruptcy and Insolvency Act is served, the creditor cannot take any action to enforce its security until 10 days after the notice is served.
If the demand letter has been issued, no arrangement has been reached, the next step in the foreclosure process is for the creditor to file a statement of claim with the Court of Queen's Bench and serve it on the farmer. A statement of claim is the document that starts a lawsuit. The document describes what has happened and what is being sought from the Court. It usually includes such things as:
The term of loan.
The terms of the mortgage.
The amount of money owing.
The kind of default that has occurred.
A claim for sale of property to the creditors.
Foreclosure.
An order for possession.
An order for a shortened redemption period.
An order granting costs to the creditors.
Other requests.
A statement of claim will usually be served on a farmer by registered mail or personally, but there are other methods of service.
Once in receipt of the statement of claim, a farmer has three alternatives: do nothing, file and serve a statement of defense, or file and serve a demand of notice. A farmer usually has 15 days from the time the statement of claim is received to file a statement of defense or a demand of notice.
The next step is for a creditor to apply to the court for an Order Nisi, or order for sale. This effectively is a judgment of the court that the land be offered for sale if the amount owing is not paid within the period allowed for redemption.
The redemption period is the time set by the court after granting an Order Nisi, within which a farmer is allowed to redeem the mortgage. Basically, if the farmer pays off the arrears owing under the mortgage, the foreclosure process stops and the farmer keeps both title to and possession of the land. If the mortgage has matured, arrears usually consist of the full amount owing under the mortgage in addition to overdue interest and legal costs incurred by the creditor - not just the previous payments missed. In many cases, the redemption period is used by farmers to seek refinancing if refinancing is available and is in their best interest. The redemption period is usually one year from the date the Order Nisi is granted. However, it is possible that the Court may either decrease or extend this period in regard to circumstance.
After the redemption period has expired, and the mortgage has not been redeemed, the court may offer the land for sale at a time and place in any manner, and at any price that the court considers proper. The court may decide to order that the land be sold by advertising for tenders to the public. The advertising is carried out according to the directions of the court. Advertisements in newspapers notifying the public of a judicial sale and inviting tenders is an example of how these directions are carried out.
There are situations when advertising is not required. Other means of selling the land, such as listing with Realtors, can be used if the court is convinced this will be more effective.
If a tender proves acceptable to the court, the creditor applies for an order confirming sale and vesting title within 25 days after the date tenders close. Normally, the court will grant the order confirming sale if the amount of the tender offered is close to the appraised value of the property accepted by the court. However, the court can reject an application if a tender is much lower than the appraised value. The court may order that the land be re-advertised or that it be sold by some other means.
It is possible in some cases for the creditor itself to bid on the land and have the purchase approved by the court. This will usually be done when the creditor wants to avoid obtaining a final order for foreclosure such as in cases when creditors are realizing on land mortgages taken from farm corporations.
The final result of a successful sale is that the title and possession of the land will be granted to the new purchaser. The money received for the purchase will be distributed to the creditors that have claims against the land in the order of priority set by law. Once all the creditors' claims against the land have been satisfied, any remaining funds will be distributed to the farmer.
If the land is not sold pursuant to the method ordered by the court, a creditor may apply to the court for an order for foreclosure. If a farmer still has substantial equity in the land, the court can grant a request to advertise again or provide another opportunity for the farmer to redeem the mortgage.
Normally, the order for foreclosure also operates to fully satisfy the debt owing to the foreclosing creditor. Therefore, if a creditor obtains an order for foreclosure on a piece of land that it has a mortgage against, the debt is extinguished and the creditor can no longer pursue a farmer for amounts still owing if the value of the foreclosed land does not fully satisfy the debt.
While ForeclosureCanada.org strives to keep the information on this site accurate and current, ForeclosureCanada.org cannot guarantee the accuracy, completeness, or timeliness of the information.
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