Foreclosures in BC

Foreclosures are the remedy available to a lender when a borrower who has guaranteed land as security fails to repay the loan.

The owner of a piece of real estate who borrows coronet realty through the use of a mortgage loan is said to have an "equitable right to redeem", meaning that even though he owes money to a mortgage lender who has a charge against the real estate asset and has breached the mortgage loan contract and therefore lost the legal or contractual right to redeem the property the owner still has the opportunity to redeem the assets and cover if he can somehow get the money.

What this signifies to a loan company who's loan has been unpaid is that before he can take the real estate or otherwise cause it to be sold he must extinguish the borrower's equitable right to redeem the loan. This is frequently a technicality in that a consumer who has the funds to clear the bank loan through his equitable right of redemption probably wouldn't find himself in the foreclosure situation in the first place.

In British Columbia the foreclosure process begins with a petition to the Supreme Court. It is prepared, filed, and served to all respondents. The coronet realty are the borrower, of course, but also anybody else who has a claim on title that has to be extinguished. These can include any guarantors, subsequent lending agencies, the registered owner of the property (if different from the borrower), a buyer (if there is an contract to sell the property in existence) and any Builders' Lien claimants. The petitioner is the lender who wants to foreclose (or for that matter, a strata corporation that is owed funds).

There are an assortment of remedies available to a lending agency. The initial step is an agreed upon accounting of all funds owing. The Registrar of the Supreme Court will evaluate the property loan contract and the payment history and determine exactly what is in arrears, including how the debt will change as a result of accruing interest as time passes. This produces a figure that each party must recognize and agree to should settlement actually come to pass.

Next is a judgment on any personal covenants that the borrower may have assigned the financial institution. That covenant survives the sale of the real estate, so even if the borrower has disposed of the property he's still liable for the outstanding loan amount. This type of judgement can also be administered to any guarantors or subsequent purchasers (assuming they also provided a covenant to the bank when buying the property).

If these steps work the process stops. For coronet realty, if the guarantor pays the mortgage lender, or the new purchaser clears up the debt, the bank has been satisfied and the foreclosure procedure will normally finish. If the procedure does cease at this phase it's obvious that it wasn't a very genuinequestion to begin with.

Sometimes a receiver can be appointed. Property with commercial income or rented properties fall into this category. Mortgage contracts usually have an assignment of rents, and this clause can be invoked.

A lis pendens can also be filed against a property. This stops the property from being disposed of while the lending agency sort out their differences.

For a substantial default foreclosure of the borrower's interest in the property (and, as mentioned, the rights of all other respondents)is the typical course of affairs.

The first thing that occurs is for the financial institution to send a demand letter to the borrower specifying a time frame to satisfy the outstanding loan. Failure to do so leads to the creditor carrying on to the next step, which is the filing of the petition with the Supreme Court.

The Court will then issue an Order Nisi which formally establishes the sum required to settle the mortgage loan and the time to do so. This amount of time is called the improvement period. It's often six months, but that can vary.

At this point there are two ways to go. The first involves the petitioner asking the Court to approve a judicial sale. In this case the title of the coronet realty doesn't change, but the property is listed for sale. Generally a realtor will list the property, get offers and present them to the Court.

The Court (in the form of a Master) will review the offers and if they are acceptable (acceptable to the lender and fair to the borrower) will make a court order specifying that the property be sold with a clear title, and with the proceeds satisfying the debt. Any excess will go to the borrower; in the case of a shortfall the lender has more deeply redress against the borrower.

The second approach is that of the absolute order of foreclosure. If the redemption period has ended, the value of the real estate is equal to the outstanding debt, or more, the borrower is "judgement proof" and the asset can't be sold (i.e, there is no interest from any buyers), the lender can petition the Court to transfer title free and clear of all encumbrances to the lender.

The Order Absolute works both ways. If it is ordered the loan company cannot enforce a personal covenant against the borrower unless the order is re-opened. If the mortgage lender sells the property off to a third party he cannot enforce a judgement against the borrower because the asset cannot be returned upon payment. If the borrower comes up with the funds to cover the loan the order can be re-opened, and the borrower's right of equitable redemption is refreshed, but this can only be done by the Court, is only done on the basis of equity, and is not common.

Any individual with a passing awareness acquaintance with foreclosures in British Columbia will be aware that the judicial sale course is the most usual one used in foreclosures in British Columbia. Commonly called a "court ordered" sale, the court, through its agents (the lawyers) oversees the sale.

After the Order Nisi has been issued, and usually after the redemption period has ended, the lawyer for the loan company can petition for a conduct of sale order. He will then order the property to be listed with a realtor who will market the property and assets. The property must be competitively priced to safeguard the owner's "equity of redemption", and the Court will make sure of this.

Because a court ordered sale will be in the form of a court order all bids must be subject free before they go to court. The Master's decision will be final, and any successful purchaser who does not complete the sale will be defying a court order. The lawyers won't let this happen. Therefore, all conditions must be removed before a court date is scheduled.

One subject free offer that is acceptable to the loan company can result in a court date. At court the lender's lawyer will explain the offer and describe the marketing done and market's response to it. If the Master is pleased that the marketing has been suitable, and that the bid is a good one, he will accept it (he is the decision maker, not the lender or borrower) and issue the order.

If there is a court date you can see multiple bids. The price and conditions of the first offer will be known, as it is a court document and for this reason public knowledge. This enables your competition to know exactly what they have to do to beat you. Moreover, the lawyers for some loan companies will specifically demand that the real estate salesperson disclose the first offer price to subsequent purchasers.

If you find yourself in this position don’t forget that offers can be modified right up to the time they are presented to the Master. winning regularly relies on evaluating the competition, making a guess at what they will offer, and then adding as little as $200 to the highest offer.

If you haven't been to a foreclosure before the operation will go by rapidly. Purchasers typically really don't even know they've succeeded until another person more experienced in watching court advises them.

Try to remember, these are rules for British Columbia. Mortgage statutes differ from local area to local area and country to country.