According to Common Law, every mortgage comes within the right of the lender to take back the property if the borrower defaults on the loan. However, it is standard procedure not to defer to common law, but rather provide for the right of foreclosure, by way of contract between lender and borrower.
In British Columbia, the foreclosure process is controlled by the B.C. Supreme Court. The Supreme Court Civil Rules assure the borrower each of the following steps of a foreclosure proceeding must be approved by the Supreme Court:
1. Demand for Payment
To initiate foreclosure proceedings the lender sends a letter to the borrower informing them that the balance of the mortgage is due and demanding payment of arrears plus legal costs.
2. Petition
If the situation is not resolved by the borrower, the lender’s lawyer files a foreclosure petition in B.C. Supreme Court. Lender is referred to as petitioner. The borrower, (respondent), is served with a copy, as well as all other interested parties, (mortgage holders, tenants, lien holders).
3. Order Nisi
The petition prompts an action known as the order nisi which establishes the amount required to redeem the mortgage and the time period in which to do so. This time period is referred to as the redemption period, and is approximately six months.
One of two things can occur following the order nisi and the redemption period. The lender may choose to have the property listed for sale by the court, (a judicial sale), or seek an Absolute Order of Foreclosure from the court.
4. (a) Judicial Sale
The lender may seek an order approving the sale of the property. In this case, the property will be listed for sale by a realtor, who will collect offers from prospective buyers and present them to the court. The court will review the offers, and if they are deemed fair to both parties, the court will order that the property be sold with a clear title.
If the sale does not generate enough money to pay the lender in full, the lender can seek a deficiency judgment against the borrower.
4. (b) Absolute Order of Foreclosure
If the following conditions exist after the redemption period has expired, the lender may petition the court for an absolute order of foreclosure:
i) The value of the property is equal to or exceeds the mortgage debt.
ii) The borrower is declared “judgment proof”, having no assets to apply toward the deficiency.
iii) No offers are received in the judicial sale.
Once an Absolute Order of Foreclosure is granted, the lender becomes the new registered owner of the property and all other respondents are removed from the title. This is a final decision. No further action can be taken against the borrower.
