Foreclosure

This simplified foreclosure process applies to most, but not all, situations.

Most people who buy a home borrow money from a bank or other financial institution to help cover the purchase price. Usually, the loan is secured by a mortgage on the property. 

Being in default means you have broken the mortgage terms. Mortgages have many promises the borrower must follow. Breaking any of these promises can be a default. The most common default is not making mortgage payments when they are due. 

If you default on your mortgage, your lender may take legal steps to foreclose on (take possession of and sell) your property. 

Most mortgages have an acceleration clause stating that if a payment is missed the entire amount owed must be paid immediately. Some mortgages let the lender demand repayment in full and initiate foreclosure at their discretion, without default.

Plaintiff: The lender who started the foreclosure process. Their lawyer will be at the court hearing on the lender’s behalf.

Defendants may include:

• you, and any other borrowers on the mortgage
• the guarantor, if someone acted as one
• Licensed Insolvency Trustee, if the borrower is bankrupt or was bankrupt during the mortgage
• owner of the property, including any new owner.

The lender can start the foreclosure process to take possession of and sell your property if you default on your mortgage. 

Default means you break any of the terms of your mortgage, including being late with mortgage payments. If you do not make payments as scheduled, the lender has the legal right to apply to court for a Foreclosure Order directing the sale of the property at public auction. 

When you arrange a mortgage, it is a contract between you and the lender. You agree to pay back the principal and interest according to a set schedule. The house is security for the loan. You are the legal owner of the house, but the lender will record the mortgage against the property at the Land Registry to protect their interests.

Lenders usually do not want to foreclose and will make reasonable efforts to allow you to keep your home, including refinancing or setting up a payment plan. Talk to your lender if you are having trouble making mortgage payments. Do not wait until legal proceedings have started against you, as costs can quickly add up, making it harder to resolve.

Before taking legal action, the lender or their lawyer will usually send you a Demand Letter. By the time it is sent, the lender has usually hired a lawyer. This will increase the amount of money the lender seeks to collect.

A Demand Letter tells you:

• why you are in default (for example, you have missed payments)
• the amount you owe (usually including arrears and legal costs)
• a deadline for making the payment (often 10 days)
• that if you do not pay, the lender will take legal action.

If you get a Demand Letter:

• call the lender or their lawyer right away and try to negotiate to get your mortgage back on track
• ask whether you can refinance to lower your mortgage payments and pay them over a longer period of time
• try speaking with a different lender or mortgage broker to see if you can get a new mortgage to pay off the original one
• get advice from a credit counsellor or licensed insolvency trustee
• consider selling your property.

If you do not respond to a Demand Letter before the stated deadline or cannot negotiate an agreement with the lender, they can start the foreclosure process in court.

If no defence is filed and the lender goes through the normal steps, it usually takes 2 to 3 months from the filing of the Notice of Action and Statement of Claim to the conclusion of the public auction sale. It may take longer, depending on the court schedule and other factors.

The 2 to 3 months consist of: 

1. issuance and service of the Notice of Action and Statement of Claim
2. 15 business days to file a defence after being served the Notice of Action (longer if you are served outside of Nova Scotia, as explained above)
3. if no defence is filed, the lender scheduling the motion to court for a Foreclosure Order with 4 business days’ notice.
4. the 15 business days for required newspaper advertisements and notices following the issuance of the Foreclosure Order.
5. the 15 business day time limit for the successful bidder to pay the full purchase price.

The days are business days, and do not include weekends and weekdays when the court is closed. The rest of the time involved will depend on how quickly the lender decides to proceed, and other factors such as the time required for service.

If a defence is filed, the above timeline can vary a lot. The lender may make a motion to court for Summary Judgment, and how long things will take will depend on the contents of the defence, as well as the court schedule.

The Notice of Action and Statement of Claim are the forms the lender files with the Supreme Court of Nova Scotia to start the foreclosure process. The forms come from Nova Scotia’s Civil Procedure Rules. The rules are available online at courts.ns.ca.

A Notice of Action is a court document that tells you that the lender has started a legal process against you because you broke the terms of the loan or mortgage. It tells you who is involved in the Foreclosure process and how long you have to file a defence.

A Statement of Claim is a court document attached to the Notice of Action. The Statement of Claim outlines the details of what the lender is claiming against you and may include:

• the date of the mortgage
• the property involved 
• mortgage registration information at the Registry of Deeds or Land Registration Office
• details of the default (you defaulted because you did not make a payment or broke some other term of the mortgage)
• agreement(s) that might have changed your mortgage
• the total amount outstanding on the mortgage or amount unpaid, usually including the principal balance, interest, property taxes, legal fees and out-of-pocket expenses of the lender (protective disbursements)
• a Foreclosure Order, statement asking for foreclosure and sale of the property, if the total amount of the mortgage, interest and costs are not paid
• a statement asking for the court's permission (leave) to apply for a Deficiency Judgment to cover the balance of the loan, if the property is sold for less than what is owed to the mortgage lender.

The Statement of Claim may include a judgment against you for the amount of the outstanding debt, and a Foreclosure Order if that judgment debt is unpaid.

The lender is required to deliver (serve) the legal document to you in person. They may not just drop it off in your mailbox or courier it to you, unless the court permits them to serve in a different way (substituted service). However, a court generally only grants this if the lender can show they have tried all reasonable ways to serve you in person. It is not a good idea to evade personal service, as this will increase the lender’s legal costs, which will be added to your debt.

Once you are served the Notice of Action and Statement of Claim you may:

• contact the lender's lawyer to see if you can reach an agreement to avoid foreclosure. Depending on what the lender requires, this could include:
  • paying the arrears and costs
  • paying the entire principal debt, interest, costs and legal fees
• file a defence to the claim within the required time
• apply to court, to ask to have the foreclosure process discontinued
  within the required time.

You would need to pay all the arrears and legal costs. The right to have the foreclosure discontinued is only available once during the life of your mortgage.

The form and general instructions for filing a defence are on the Nova Scotia Courts website under How to Defend an Action on the Supreme Court – Court Forms page. Try to get legal advice if you want to file a defence. Contact a lawyer in private practice or, if available in your area, a Free Legal Clinic for people who are going to the Supreme Court without a lawyer.

If you disagree with what is in the Notice of Action and Statement of Claim, you can file a defence with the Supreme Court of Nova Scotia within the following time:

• 15 business days: if you are served in Nova Scotia
• 30 business days: if you are served outside of Nova Scotia but within Canada
• 45 business days: if you are served outside of Canada.

Business days do not include weekends and weekdays when the court is closed. The 15-day timeline applies to most circumstances, it is important not to miss the deadline.

If you choose to file a defence, it should include why you disagree with what is in the Notice of Action and Statement of Claim, and why you feel your property should not be foreclosed on.

Some examples of defences may include that you: 

• did not sign the mortgage 
• never got money from the lender
• repaid the lender
• have not broken any mortgage terms and you are not in default.

You must file your defence with the Supreme Court of Nova Scotia and personally serve a copy to the lender or their lawyer. The court will then give you a date to appear to dispute the lender’s foreclosure claim.

If you do not either file a defence or apply to the court for other relief, such as discontinuing the foreclosure, the lender will apply to a judge for a Foreclosure Order. This court application is called a motion and is usually done without notice to you (ex parte). The idea is that you already got the Notice of Action and Statement of Claim and chose not to participate by not filing a defence.

At the hearing for the lender’s motion for a Foreclosure Order, the judge can:

• ask for more information or better proof of the mortgage debt
• order that others be present before they hear the case
• direct the sale of the property by granting a Foreclosure Order.

If no defence is filed, usually only the plaintiff’s lawyer attends the foreclosure court hearing.

Maybe. Some possibilities are to: 

• negotiate
• redeem the mortgage
• reinstate the mortgage
• file a successful defence.

Negotiate: The easiest way is to negotiate with the lender. If you have missed payments, contact the lender and talk about your situation. The lender may be willing to give you time to catch up with payments by paying arrears and costs. You may be able to refinance so that you have lower mortgage payments over a longer term. Never ignore the lender’s letters or inquiries.

Redeem: You may redeem the mortgage by paying the full amount owing, including the interest, principal and any penalties or costs, before the sale of your property at public auction. This way, you keep the equity built up in your home.

Option 1: getting a new mortgage from a different lender to pay out the first mortgage. This can be difficult. Sometimes a mortgage broker can help. The Financial Consumer Agency of Canada has general information about mortgages that you might find useful. 

Option 2: selling your property before the auction for more than what is owed to the lender. If you have a Purchase Agreement for the sale of the property, you should provide a copy to the lender’s lawyer right away. Depending on the sale terms and the purchase price, the lender may choose to suspend the foreclosure process to allow you time to complete the sale.

Reinstate your mortgage: You have this right under a provincial law called the Judicature Act. Apply to the Supreme Court to discontinue the foreclosure and have the mortgage reinstated. This option can only be used once during the term of a mortgage.

If the default is non-payment of the mortgage, you will have to pay all the arrears and the lender’s legal costs (legal fees and out-of-pocket expenses). If the default is a breach of a promise (covenant), you will have to perform the promise and pay the lender’s legal costs.

You can apply to court to discontinue the foreclosure even if the lender is refusing to accept payments. However, you can only apply before the court has made a Foreclosure Order (see ‘What happens if I do not file a defence?’).

Defend the action: If you have a successful defence, the foreclosure process may be stopped.

Nova Scotia’s Judicature Act gives you the right to reinstate the mortgage and discontinue the foreclosure process by paying all outstanding arrears and costs owed to the lender or performing the covenant (promise) that is being broken. You can do this even if the lender refuses to accept payments. You have up until the court issues a Foreclosure Order.

You must apply to the Supreme Court of Nova Scotia. You should get legal advice and help with your application. Contact a lawyer in private practice, or there are Free Legal Clinics in Nova Scotia for people who are going to the Supreme Court without a lawyer.

This right is only available once per mortgage. The court has no power to discontinue if there is a second foreclosure proceeding under the same mortgage.

If the mortgage has been reinstated once before, the only way to stop the new process is through agreement with the lender or by paying the entire amount of the mortgage, plus interest, costs and their out-of-pocket expenses.

No, the lender can still foreclose if you are in default of the mortgage terms.

However, it may help you to declare bankruptcy on other debts so that you may focus on paying the mortgage. It may also help deal with any deficiency claim after sale at public auction. Talk to a licensed insolvency trustee about your financial situation and options. Go to the Bankruptcy page for more information, or contact the federal Superintendent of Bankruptcy.

After the court grants a Foreclosure Order, a court-appointed auctioneer or sheriff will sell the property at public auction.

The courthouse or justice centre in the local judicial district where the property is located holds the auction.

The lender (plaintiff) or their lawyer must:

• advertise the sale of the property in a newspaper approved by the court.
• publish at least two advertisements:
• the first at least 15 business days before the public auction
• the second within 7 business days of the public auction
• notify the property owner(s) and the borrower(s), if they are not the same person, of the sale date, time and place at least 15 days before the public auction. They can notify the borrower by regular mail.
• The auctioneer or sheriff holds the public auction at the time and place in the notice. If you wish to bid, you must go personally or send someone.

The successful bidder must pay 10% of the sale price at the end of the auction and then has 15 business days to pay the rest. As the successful bidder, if you have not paid the rest within the 15 business days, you will lose your 10% deposit. It will be applied against the auction costs and the debt. You cannot recover this money.

The 10% down payment at the auction rule is firm. If you are the highest bidder but do not have the full 10% in guaranteed form (cash, certified cheque or solicitor’s trust cheque) with you at the auction, your bid may be unsuccessful. The property will go to the next highest bidder.

The auctioneer or sheriff can allow the highest bidder a short amount of time, as little as 15 minutes, to get the funds but is not required to and may refuse. Therefore, success requires having the 10% available at the auction.

If the lender is the successful bidder, they may still ask for a Deficiency Judgment if there is a shortfall between the mortgage debt plus costs and the property’s net sale proceeds.

Yes. The property is sold to the highest bidder at a public auction.

Although unusual, if the lender has an offer to purchase the property from a third party, the lender may apply to the court for approval to sell the property privately. However, in most cases the property will be sold at a public auction.

Yes. You may try to sell the house up until the date of the public auction.

Deficiency: Following the sale, a lender (plaintiff) may apply to the court for a Deficiency Judgment against the borrower for the difference between the amount owing on the mortgage (plus interest, costs, out-of-pocket expenses, sheriff fees, property taxes), and the amount received from the property sale.

The lender must show that the amount obtained from the sale reflects fair market price. This is determined by actual sale price or through an appraisal.

The borrower and anyone else who may have to pay the deficiency amount will get at least 10 days’ notice of the Deficiency Hearing. The plaintiff has 6 months to apply for a Deficiency Judgment, from the date of the public auction.

If the property sale at public auction brings in more money than the amount owed to the plaintiff, the auction costs and outstanding taxes, the auctioneer or sheriff pays the surplus into the Court. Any party involved with the foreclosure, including the borrower, may apply to the Court to receive the surplus – but they must file an affidavit (sworn document) to prove they are entitled to it and have priority for the claim. The Court may then order the surplus be distributed to those entitled.

You should try to get legal advice if you wish to claim the surplus.

The court has the power to overturn the public auction in exceptional cases. An example would be if the directions in the Foreclosure Order were not followed.

If no Defence is filed and the lender goes through the normal steps, it normally takes 2 to 3 months from the filing of the Notice of Action and Statement of Claim to the conclusion of the public auction sale. It may take longer, depending on the court schedule and other factors.

The 2 to 3 months consists of:

1. Issuance and service of the Notice of Action and Statement of Claim.
2. The 15 business days to file a Defence after being served the Notice of Action (longer if you are served outside of Nova Scotia, as set out above).
3. If no Defence is filed, the lender can schedule the Motion to court for a Foreclosure Order with 4 business days’ notice.
4. The 15 business days’ for required newspaper advertisements and notices following the issuance of the Foreclosure Order.
5. The 15 business day time limit for the successful bidder to pay the full purchase price.

The days are business days, so weekends and weekdays when the court is closed are not included. The rest of the time involved will depend on how quickly the lender decides to proceed, and other factors such as the time required for service.

If a Defence is filed, the above timeline can vary a lot. The lender may make a motion to court for Summary Judgment, and how long things will take will depend on the contents of the Defence, as well as the court schedule.

When the lender sends the notice of sale at public auction to the homeowner, they usually advise that the homeowner must vacate (leave vacating the premises on or before the public auction date.

If you are a homeowner, you must leave the property once the successful bidder completes the purchase, unless the new owner says you don’t have to move.

The Foreclosure Order enables the lender to ask the sheriff to deliver possession of the property to the new owner. This means the lender may require you leave as soon as the Foreclosure Order has been issued (made), although this would be unusual.

Once the property has been sold at public auction, you may ask the new owner for permission to stay in the property. However, they have no obligation to let you stay and you should be prepared to move out on the public auction date. 

If you are a tenant, how soon you move out depends on the type of tenancy you are in and on what the purchaser intends to do with the property.

If you are a residential tenant (renting) you must be given notice according to the Residential Tenancies Act (the earlier of 3 months or the expiry of the lease under any written lease agreement – such as a fixed term lease). For more information you can contact Residential Tenancies by calling 902-424-5200 or 1-800-670-4357, or by attending your nearest Access Nova Scotia location. 

If you are a commercial tenant (rent for a business) you must move out the day of the foreclosure sale, unless the new owner tells you otherwise.

The successful bidder becomes the owner of the property once the full purchase price has been paid and they get the deed. The foreclosure is complete once the Confirmatory Order is granted.

Once the property is sold the auctioneer or sheriff files a Report with the court. The Report states that the property has been sold, the name of the successful bidder, the purchase price, how the money was distributed and that a property deed was delivered to the successful bidder.

Once the Report is filed, the lender will apply for an Order Confirming Sale. This Order states the public auction has taken place and the foreclosure process is complete.

The lender must also file an affidavit (usually prepared by their lawyer) confirming that the advertisements were placed and the notices were sent out, meeting the Foreclosure Order requirements.

Make contact with the lender and a lawyer

• Your lender: read your mortgage document carefully and talk with your lender about options you may have if you are having financial problems.
• A lawyer: try to talk with a lawyer in private practice if you are not sure about what to do. Here are some ways to find a lawyer.

Nova Scotia Legal Aid does not generally deal with foreclosures, although you should contact them directly to see if they can help in your situation. Visit nslegalaid.ca or look under 'Legal Aid' or 'Nova Scotia Legal Aid' in the telephone directory.

There is also a Free Legal Clinic in Halifax, Sydney, Yarmouth and Truro for people who are going to Supreme Court without a lawyer.

• information about the foreclosure process:
  • Nova Scotia’s Civil Procedure Rules (court rules and forms that apply in the Supreme Court of Nova Scotia)
  • Supreme Court of Nova Scotia, Practice Memorandum - Foreclosure Procedures
  • Nova Scotia's Judicature Act.
    
    
• A trustee in bankruptcy, also called a Licensed Insolvency Trustee can provide professional advice about your debt options. Trustees are listed in the Yellow Pages under 'Bankruptcies', or search for 'trustee in bankruptcy' online. You can also get a listing of local trustees from the Office of the Superintendent of Bankruptcy at 1 877 376-9902 (toll free) or osb.ic.gc.ca.
  
  
• Office of the Superintendent of Bankruptcy which regulates bankruptcies, oversees and licenses trustees in bankruptcy (licensed insolvency trustees), and has helpful general information for debtors and creditors. Website  www.osb.ic.gc.ca
  Industry Canada
  Phone: 1 877 376-9902 (toll free).

• A credit counselling agency. Credit counsellors cannot administer bankruptcies or consumer proposals, but can help you with things such as a debt or general money management plan, budgeting, wise credit use.
  
  
• The Financial Consumer Agency of Canada has information about how to find a reputable Credit Counselling service: www.fcac-acfc.gc.ca or call 1 866 461-3222. Lots of consumer information on many financial topics.

• University of King's Investigative Workshop, "Foreclosed",July 2019, news article about the Foreclosure process in Nova Scotia.