This page gives legal information about residential mortgages. It does not give legal advice, and does not replace advice from other professionals, such as a credit counsellor, trustee in bankruptcy, or mortgage advisor. It is best to talk to your lender right away if you are having trouble making your mortgage payments. A credit counsellor or trustee in bankruptcy might also be able to help if you are having financial difficulties.
The process set out below is known as the “simplified procedure”. It applies to most foreclosures. However, the procedures may differ, depending on the complexity of your situation.
'Mortgagor' means the borrower, or the person(s) borrowing money from the financial institution.
'Mortgagee' means the lender, or the financial institution lending you money.
A mortgage is a loan agreement or contract between a borrower and lender, where the borrower’s property is promised as security for the loan. Mortgages can take many forms and can be taken by a mortgagee to secure obligations of the borrower whether or not the money being borrowed is for the purchase of the property.
|The usual steps in a foreclosure are:|
|1. Default||Borrower defaults on mortgage|
|2. Demand Letter||Lender sends Demand Letter to borrower|
|3. Notice of Action and Statement of Claim||If demand letter fails, the lender starts legal proceedings and serves the borrower, in person, with court documents starting the foreclosure process (Notice of Action & Statement of Claim)|
|4. Defence||After getting the Notice of Action and Statement of Claim, the borrower files a defence or applies to court for other relief within: 15 business days, if served in Nova Scotia; 30 business days, if served in Canada, but outside Nova Scotia; 45 business days, if served outside Canada.|
|5. Motion to Court for Order for Foreclosure, Sale and Possession||If no agreement is reached, and no defence is filed within the required time after Notice of Action and Statement of Claim is served on the borrower, or any defence is unsuccessful, the lender makes a Motion to court for Order for Foreclosure, Sale and Possession|
|6. Order for Foreclosure, Sale and Possession issued by court||Court grants Order for Foreclosure, Sale and Possession|
|7. Notice of sale of the property at Public Auction||Notice is published twice in a local newspaper, with a copy sent to borrower by regular mail at the mortgaged property (or last known address if different from mortgaged property) at least 15 days before sale|
|8. Sheriff’s sale of the property by Public Auction||Property is sold at a public auction in the county where the property is located. Generally, homeowner (borrower/mortgagor) should be ready to move out on the date of the public auction.|
|9. Claim for Deficiency or Surplus after the sale||Application(s) to court to deal with any deficiency or surplus based on the proceeds of sale.|
|10. Confirmatory Order||The lender obtains an order from the court confirming that the foreclosure is complete|
In Nova Scotia foreclosure is a legal process which allows the lender to get ownership of the property and to sell it at a public auction (‘foreclosure and sale’), and to use the sale proceeds to pay off the mortgage debt, legal costs, Sheriff fees and other costs.
Most people who buy a home need to borrow money from a bank or other financial institution to help cover the purchase price of the home. Usually the loan is secured by a mortgage on the property.
If you default on your mortgage your lender may take legal steps to ‘foreclose’ on your property. Default means you have broken the terms of your mortgage. The most common reason for a default is not making mortgage payments when they are due.
Mortgages have many conditions and covenants (promises) the borrower must follow. A breach of any of these promises can be a default, which can result in foreclosure. While failure to pay amounts owing to the lender is the most common default, it is not the only form of default. Some mortgages even allow the lender to demand repayment of the mortgage in full and subsequently foreclose at any time at their discretion without default.
When you arrange a mortgage, it is a contract between you and the lending institution, where you agree to re-pay the principal and interest according to a set schedule. While you are considered the legal owner of the house, the lender will have recorded this mortgage with the Land Registry, to protect their interests. If you fail to make the scheduled payments as set out in the mortgage agreement, the lender has the legal right to force a sale of the house.
However, most lenders prefer to avoid foreclosing, and will make reasonable efforts to accommodate your circumstances, including refinancing (whether with the current lender or another lender or financial institution) or setting up a payment plan that better suits your financial situation. So, talk to your lender right away if you are having trouble making your mortgage payments. Do not wait until legal proceedings have started against you as your options may be greatly reduced.
Q- When can the lender foreclose on my property?
The lender can start the foreclosure process if you default on your mortgage. Default means you break any of the terms of your mortgage, including falling behind on mortgage payments.
Most mortgages have an ‘acceleration clause’, which usually says that if you miss a payment the entire amount owing on the mortgage is payable right away.
Demand letter: Before taking legal action the lender or his or her lawyer will usually send you a demand letter.
A demand letter:
- tells you why you are in default (for example, you’ve missed payments);
- tells you the amount you owe. This usually includes arrears and legal costs;
- gives you a deadline (often 10 days) for making the payment;
- says it is your last chance to pay before the lender takes legal action.
It is not a good idea to ignore a demand letter. This is an opportunity to negotiate with the lender or their lawyer to try to get your mortgage back on track. Call the lender or their lawyer right away. Usually the lender would prefer it if you can catch up on your payments, so talk to them about how and when you might be able to do that. Ask whether you can refinance, to lower your mortgage payments and pay them over a longer period. You can also try speaking with a new lender to see if you can get a new mortgage to pay off the original mortgage. You might also want to consider putting your property up for sale because a sale outside of the Public Auction process generally generates a higher sale price. However, as stated earlier, if you are facing financial difficulty and are unable to make your mortgage payments, you should talk to you lender right away. By the time a Demand Letter is sent out the lender has usually already retained a lawyer, which will increase the amount of money the lender is looking for to bring the mortgage up to date.
Yes. You will get a Notice of Action and Statement of Claim.
Notice of Action and Statement of Claim: If you do not respond to a demand letter before the deadline in the letter, or can’t negotiate an agreement with the lender, the lender (mortgagee), may start the foreclosure process.
The lender starts foreclosure by having a legal document called a Notice of Action and a Statement of Claim filed with the Supreme Court of Nova Scotia and delivered to you. They are required to deliver this notice to you in person (‘personal service’). It is not something they may drop off in your mail box or courier to you, unless the lender has applied to the court to get permission to have you served (notified) in an alternative way, called substituted service. However, a court generally only grants substituted service if the lender proves to the court that they have exhausted all reasonable efforts and attempts to serve the borrower in person. It is not a good idea to evade personal service as this will increase the lender’s legal costs, and therefore will increase the amount the lender is looking for when the foreclosure is complete.
Q- What is a Notice of Action and a Statement of Claim, and what are some of my options if I get a Notice?
A Notice of Action is a court document that tells you that the lender is starting a legal process against you because you broke the terms of your loan or mortgage. It tells you the basics of 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 in court. It may include the following:
1) The date of the mortgage:
2) Details of the registration of the mortgage at the Registry of Deeds or Land Registration office;
3) The property involved;
4) Details of the default (for example, you defaulted because you did not make a payment or broke some other term of the mortgage);
5) Details of any agreement(s) that might have changed your mortgage;
6) The total amount outstanding on the mortgage or amount unpaid. This will usually include the principal balance, interest, property taxes, legal fees and out-of-pocket expenses of the lender, generally known as “protective disbursements”;
7) A statement asking for foreclosure and sale of the property (‘Order for Foreclosure, Sale and Possession’) if the total amount of the mortgage, interest and costs are not paid;
8) A statement asking 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.
Once you are served the Notice of Action and Statement of Claim you may:
- pay the money (which usually means paying the entire principal, interest and costs); or
- file a defence to the claim within the required time; or
- apply to court, within the required time, to ask to have the foreclosure process discontinued. You would need to pay up all the arrears and legal costs. The right to have the foreclosure discontinued is only available once during the life of your mortgage.
If you want to file a defence, you must file it within the required time.
If you disagree with what is in the Notice of Action & Statement of Claim, you should 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; and
- 45 business days if you are served outside of Canada..
The days are business days, so weekends and weekdays when the court is closed are not included. The 15 day timeline applies to most circumstances, so don’t miss the deadline.
If you choose to file a defence, it should include why you feel your property should not be foreclosed upon. You should try to get legal advice if you wish to file a defence.
Some examples of defences may include:
1) That the mortgage was not signed;
2) You never received money from the lender;
3) You repaid the lender;
4) You have not broken any mortgage terms and you are not in default.
You must file your defence with the court (Supreme Court of Nova Scotia) and serve the lender or their lawyer personally with a copy of your defence. The court will then give you a court date for you to dispute the lender’s claim to a foreclosure.
Q- What happens if I do not file a defence?
If you do not either file a defence or apply to court for other relief, such as applying to court to have the foreclosure discontinued, the lender will apply to a judge for an Order for Foreclosure, Sale and Possession of the property. This court application is called a motion, and is usually ‘ex parte’, which means without notice to you. The idea is that you were already notified of the court process when you got the Notice of Action and Statement of Claim and chose not to participate by not filing a defence.
At the hearing for the Order for Foreclosure, the judge can:
- Ask for more information or better proof of the mortgage debt;
- Order that others be there before he or she hears the case;
- Direct the sale of the property, making an order of foreclosure and sale;
- Make an order stating what should happen concerning the payment of the money owed.
Negotiate: The easiest way is to negotiate with the lender. If you have missed payments, contact the lender and talk about your situation right away. The lender may be willing to give you time to catch up with payments. 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 on the mortgage, 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. This may mean:
- getting a new mortgage from a different lender in order 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; or
- selling your property before the auction for more than what is owed to the lender.
Apply to court to discontinue the foreclosure (‘reinstate’ your mortgage): This option can only be used once during the life of a mortgage. You can apply to court to have a foreclosure action discontinued (have the mortgage ‘reinstated’). This is a right under a provincial law called the Judicature Act. 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 covenant (promise), you will have to perform the covenant in default 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 to court to discontinue the foreclosure before the lender has made the motion and obtained a court order for foreclosure and sale (see ‘What happens if I do not file a defence’).
Defend the action: if you file a successful defence, the foreclosure process may be stopped.
You should try to see a lawyer and other professional such as a credit counsellor to get advice about the best option in your situation.
Q- Is bankruptcy an option to stop foreclosure?
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 concentrate your finances on paying the mortgage, and may deal with a deficiency claim if the property is sold at public auction and there is a shortfall. You should talk to a credit counsellor or trustee in bankruptcy (only a trustee can deal with bankruptcies) about your financial situation and the options open to you. Go to LISNS page on bankruptcy (legalinfo.org/consumers-debt/bankruptcy.html) for information about credit counselling, and bankruptcy.
Q- Can the lender refuse to accept payments once a court process has started?
Nova Scotia’s Judicature Act gives you the right to discontinue the foreclosure process by paying all outstanding arrears and costs owed to the lender or performing the covenant (promise) that is being broken. This is also called 'reinstating' the mortgage. You can do this even if the lender is refusing to accept payments. This can be done up until an Order for Foreclosure, Sale and Possession has been issued (made) by the court. This right is only available once per mortgage. You must apply to the Supreme Court of Nova Scotia. You should get legal advice from a lawyer if you can, to get help with your application.
The court has no power to discontinue on payment of arrears and legal costs if there is a second foreclosure proceeding under the same mortgage (i.e. where you reinstated the mortgage and default again, and the lender starts foreclosure proceedings for the new default). 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 interests, costs and out-of-pocket expenses.
Q- Who are the plaintiff and defendants in a foreclosure?
Plaintiff: this is 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;
- Guarantor, if someone acted as a guarantor for the mortgage;
- Trustee in Bankruptcy, if the borrower is bankrupt, or was bankrupt during the mortgage;
- Owner of the property (any new owner).
If no defence is filed, usually only the plaintiff’s lawyer will be at the foreclosure court hearing.
Q- How is the property sold on foreclosure?
If the lender is successful on their motion and got an Order for Foreclosure, Sale and Possession, the lender will arrange for sale of the home, usually through public auction by the Sheriff.
After the court grants an Order for Foresclosure, Sale and Possession, there will be a Sheriff’s sale by public auction. The auction is done by the Sheriff, or by any other person given that power by the court. Recently, the court in Nova Scotia has allowed the sale to be done by an experienced foreclosure lawyer in order to reduce fees associated with the Sheriff.
The property will be sold at a public auction in the county where the property is located.
The plaintiff (lender or their lawyer) must:
- advertise the sale of the property in a local newspaper in the area where the property is located. There must be at least two advertisements in a local newspaper, the first at least 15 days before the sale, and the second within 7 days of the sale;
- at least 15 days before the sale, notify the property owner(s) and the borrower(s), if they are not the same person, of the date, time and place of the sale. Notice to the borrower can be sent by regular mail.
The notice will contain the time and place of the auction.
Although unusual, if the lender has an offer to purchase the property from a third party and all subsequent encumbrancers agree with the sale, 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.
Q- What is the procedure at the Public Auction?
The Sheriff, or person appointed by the court, will hold the public auction at the time and place in the notice. If you wish to bid, you must go personally or send someone to bid on your behalf.
The successful bidder will have to pay 10% of the sale price at the end of the auction and then has 15 days to pay the rest If you are the successful bidder, and you have not paid the rest within the 15 days, you will lose the 10% deposit, as it will be applied against the amount owing to the lender. You cannot recover this money.
The rules requiring 10% down payment at the auction are firm. If you are the highest bidder and 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 and the property will go to the next highest bidder. The Sheriff has the discretion to allow the highest bidder a short amount of time to get the funds but is not required to do so and may refuse. Even if the Sheriff provides you with a short time to get the funds, in practice it is as little as 20 minutes. Therefore, if you want to be the successful bidder, you should ensure you have the 10% available at the auction.
If the lender is the successful bidder they may still ask for a Deficiency Judgment.
Deficiency: Following the sale, a lender may apply to the court for a Deficiency Judgment, which is a request by the plaintiff to get a judgment against the borrower for the shortfall amount; that is, 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 sale of the property.
The lender must show that the amount obtained from the sale of the property is a fair market price. This is determined either by actual sale or though 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 Sheriff’s sale.
Q- What if the sale price is more than the amount owing to the lender?
Surplus: If the sale of the property brings in more money than the amount of Sheriff’s fees and outstanding taxes and the amount owed to the plaintiff, the surplus is given to the Accountant General of the Supreme Court. It will be distributed among those who have filed claims against the property and those who are owed money by the borrower (known as subsequent encumbrancers). They can apply to the court to be paid and are paid according to priority. Before these people are paid the Sheriff must pay any outstanding property taxes from this surplus. If there is still a surplus, any party involved with the foreclosure, including the borrower, may apply to the court or judge to receive the surplus. Before applying however, each party must file an affidavit (sworn document) to prove they are entitled to a claim. The court or judge may then order the distribution of the surplus to the parties by priority.
You should try to get legal advice if you wish to make a claim for surplus.
Q- What happens once the property is sold?
Once the property is sold and the amount due has been paid to the lender , the Sheriff files a report with the court as soon as possible. This report states that the property has been sold, the name of the successful bidder, the purchase price, how the money was distributed and that the Sheriff has delivered the deed to the property to the successful bidder.
Q- What happens once the Sheriffs report is received by the court?
Once the report is filed, the lender will apply for an Order Confirming Sale. This order states that the sale has taken place and that the foreclosure is complete. The lender must also file: 1) The sheriff’s report and 2) An affidavit (usually prepared by the plaintiff’s lawyer) stating that the advertisement was done and notices were sent to all those who had interest in the property.
Q- How soon do I have to leave the property after the sale?
You should be ready to move out on the date of the public auction.
If you are a homeowner, you must leave the property once the successful bidder completes the purchase, unless the new owner says otherwise.
The Order for Foreclosure, Sale and Possession usually gives the lender the ability to ask the Sheriff to deliver possession of the property. This means the lender may require that you leave as soon as the Order for Foreclosure, Sale and Possession has been issued (made).
However, lenders generally don’t request vacant possession (require that you leave) until the date of the sale at public auction. When a lender sends the notice of sale under public auction to the homeowner, they usually advise that the homeowner must vacate (leave) the premises on or before the date of the sale at public auction.
Once the property has been sold on the date of the 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 therefore you should be prepared to move out on the date of the public auction.
If you are a tenant, how soon you move out depends on the type of tenant you are. If you are a residential tenant (for example, renting an apartment) you must be given notice according to the 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). Contact Residential Tenancies at 902-424-5200 or 1-800-670-4357, or online at gov.ns.ca/snsmr/access/land/residential-tenancies.asp for more information. If you are a commercial tenant (a place rented for business) you must move out the day of the foreclosure sale, unless the new owner tells you otherwise.
The successful bidder becomes owner of the property once the full purchase price has been paid and the Sheriff gives him or her the deed. The foreclosure is complete once the Confirmatory Order is granted.
Q- How long does the foreclosure process take?
If no defence is filed and the lender goes through the normal steps, foreclosure takes 2 to 3 months from the filing of the Notice of Action and Statement of Claim to the concluded sale. It may take longer, depending on the court schedule.
The 2 to 3 months consists of:
1. The 15 days to file a defence after being served the Notice of Action (longer than 15 days if you are served outside of Nova Scotia, as set out above).
2. If no defence is filed, the lender can schedule the Motion to court for Order for Foreclosure, Sale and Possession, with 2 days’ notice.
3. The 15 days’ notice required between the Order for Foreclosure, Sale and Possession and advertisement for the sale at public auction.
4. The 15 day time limit for the successful bidder at the auction 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 the availability of a judge to hear the case and grant the orders.
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 success of the defence, as well as the court schedule.
Q- Where can I get more information or help?
- 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: It is best to try to talk with a lawyer if you are unsure about what to do. Unfortunately Nova Scotia Legal Aid does not deal with foreclosures, although you should contact them directly so see if they can help in your situation - go to nslegalaid.ca, or look under 'Legal Aid' or 'Nova Scotia Legal Aid' in the telephone book. Otherwise, you would need to speak with a lawyer in private practice. The Legal Information Society offers a Legal Information Line and Lawyer Referral Service if you need help finding a lawyer. Through this service you can get free legal information, and you may be referred to a lawyer who will meet with you for up to 30 min for a fee of $20 + tax, after which regular fees would generally be charged. The number is 455-3135 in the Halifax Regional Municipality, and toll free at 1-800-665-9779 in the rest of Nova Scotia. Go to LISNS’ ‘I need legal help’ page for more ways to find a lawyer in private practice;
- A credit counsellor or trustee in bankruptcy: may be able to help you if you are having financial difficulties. Go to LISNS page on bankruptcy for information;
- Financial Consumer Agency of Canada: fcac-acfc.gc.ca/eng/consumers/mortgages/ has helpful information about mortgages, budgeting and money management;
- More information about the foreclosure process:
- Nova Scotia’s Civil Procedure Rules (court rules & forms that apply in the Supreme Court of Nova Scotia);
- Supreme Court of Nova Scotia, Practice Memorandum - Foreclosure Procedures;
- Nova Scotia's Judicature Act