What is a lien?

A lien is a remedy for anyone who supplies materials, provides services, or performs work that improve someone else’s land. Each province has its own lien legislation that gives this remedy to suppliers and contractors, and each law is slightly different. This information page only discusses Nova Scotia’s law, so if you have done work on a property outside Nova Scotia, you must look at the the legislation in that province,  territory or other place.

Liens aim at filling a gap in the common law (law from court decisions) that negatively affects contractors and suppliers on construction projects. Often suppliers and contractors will perform work on a property but will not get paid for that work. Suppliers and contractors have a common law claim for breach of contract against whoever they had a direct contract with.  That is, they could sue whoever agreed to pay them for their work.  But, often the owner of the property was not the one they had a contract with and not the one who agreed to pay them. Rather, their agreement may be with another contractor who was supervising their work on the project (this type of contractor is called a general contractor). 

It is very common in construction projects, and particularly larger projects such as building a new home from scratch, to have what is called a ‘construction chain’ where the owner contracts with a general contractor, who in turn contracts with sub-contractors, who in turn contract with sub-sub-contractors and suppliers (see figure).

This construction chain can create a situation where a sub-contractor performs work on a project but is not paid by the general contractor for the work. This could be for a number of reasons - like the general contractor is not well organized,  or because they are bankrupt or insolvent. Whatever the reason, while the sub-contractor has a valid breach of contract claim against the general contractor because she has a direct contract with them, she does not have any common law claim against anyone else in the construction chain, such as the owner, even though her work helped improve the owner’s land. This applies in a similar way to sub-sub-contractors: they may have a direct contract with the sub-contractor, but not the owner or general contractor, even though their work improved the owner’s land and helped the general contractor get the work done well and on time.

That is where liens under the Builders' Lien Act come in. A lien allows the unpaid contractor or supplier to register a lien against the owner’s property in the amount they say they are owed for their work, and then claim the outstanding amount from the owner and anyone in between them and the owner in the construction chain. The lien acts as security for payment in that, once registered against the owner’s property, it interferes with the owner’s ability to sell or mortgage the property. Typically, property owners are unable to refinance or sell their property without first removing the lien from the property by paying the contractor who registered it. Liens therefore provide a useful tool for contractors and suppliers to pursue payment for work they have done on a property. 

Who can file a lien?

A lien may be filed by anyone who worked on, provided services,  or supplied materials for a certain property.  This typically includes:

• a general contractor
• subcontractors, sub-sub-contractors, etc
• suppliers; and
• labourers.

Court decisions say that liens may also be filed by architects, engineers, and surveyors as long as their work or services directly relate to the specific piece of land. 

If you do not fall into one of these categories, speak to a lawyer. There may still be a way for you to register a lien, or another way to make a claim for money owed.

Before you start - basic steps to bring a lien claim

Time limits are very important in making a lien claim.  You must strictly follow the timelines and requirements for registering liens, and for proving a lien claim.  The timelines are in the Builders' Lien Act. If you miss a deadline you may not be able to put a lien on the owner’s property, and you will not succeed in proving your lien claim.   

There are several steps to bring a lien claim:

Step 1.  Register the lien against the property at the Land Registry

Step 2.  Start a legal action in the Supreme Court of Nova Scotia against everyone above the contractor or supplier in the construction chain

Step 3.  Register the action with the Land Registry.

The next three sections discuss each step, and the strict timelines and requirements under each step.  Steps 2 and 3 must be done at the same time.

Before registering a lien contractors should also think about whether registering the lien may prompt the owner to bring their own action against you about the work you performed. For example, they may allege that your work was defective and they had to pay another contractor to fix it, and claim against you for the costs of hiring the other contractor. It is therefore important to consider:

• are there any possible deficiencies in your work that would cause the owner to claim against you?
• whether the risks of starting a lien claim are worth potentially triggering a counterclaim that could exceed the amount of your lien claim.

Of course, an owner may still claim against you even if you do not register a lien. However, filing a lien often prompts an owner who was otherwise willing to move on to file a claim.

Step 1 How do I register a lien?

First, you must register the lien against the property at the appropriate Land Registry.  

You must register the lien within 60 calendar days after the last day the contractor worked on or delivered materials to the property.

It is vitally important to record each day you work on a project and the nature of the work you performed that day, as you will need to know the last day you worked on a project in order to know when the deadline for registering your lien will expire. Court decisions have said that the last day of work does not include work performed to fix or repair work that has already been done.

Speak to a lawyer if you think the land you improved is government-owned, as liens may not attach to certain government-owned property.

If you are within the timeline for registering the lien, you must file two documents with the Land Registry:

• Claim of Lien for Registration form, and
• an Affidavit (sworn document) in support of the lien. You will need to get a lawyer, notary, or commissioner of oaths to take your affidavit before you can submit it. 

The claim must include:

• a description of the work done or the services or materials provided
• amount claimed
• last day work was done and/or materials supplied
• a description of the property to be charged (exact address). If possible, get the Parcel Identification Number (“PID”) for the property and include that in your description of the property.

You should hire a lawyer to help you draft and file these documents to make sure you have included all the necessary information.

Once you finalize these two documents, contact the Land Registry.  Ask them to register the documents against the property you have described in the documents. There is a fee for doing so. Once registered, the Land Registry will give you a copy of a confirmation page showing that the lien has been registered against the property.

Land Registration Offices are listed in the government pages of the telephone book under Land Registration, or visit: novascotia.ca

Once registered, you must give notice of the lien to all people/companies named in your lien.  Do this by sending each of them a copy of your Claim of Lien for Registration, Affidavit, and the Land Registry’s confirmation page showing that the lien has been registered. Give this notice as soon as possible, and keep a record for your files. 

The lien takes effect from the date of registration and has priority over subsequent purchasers, mortgagors and other encumbrances of the land.  However, prior encumbrances, such as mortgages who have advanced money under their mortgages before the lien was filed, will still have priority over the lien. Regardless of who files their lien first, all lien claimants of the same class (that is, all subcontractors working for a specific general contractor or all sub-subcontractors working for a specific sub-contractor) are treated equally and recover pro rata.

How long do I have to register a lien?

You have 60 days from your last day of work, or the last day you supplied materials, to register your lien at the appropriate Land Registration Office.

After the 60 days you can no longer register a lien, but you may still be able to sue the person who owes the money in either Small Claims Court or the Supreme Court of Nova Scotia for the amount of money you are owed.

Where do I register a lien?

Your lien must be filed with the Land Registration Office in the county where the property is located. There is a fee for this service. You may require a lawyer to register your lien at the Land Registration Office. Local Land Registration Offices are listed in the government pages of the telephone book under Land Registration, or visit: novascotia.ca/sns/access/land/land-registry.asp

Step 2 How to start a lien action

Once your lien has been registered and you notify the owner of the property, the owner may simply pay you the lien amount or ask their general contractor to do so. They may also want to discuss settling with you for a lesser amount. They may also tell you that they do not agree with the amount you are claiming, and/or may argue that your work was deficient and therefore you are not entitled to payment.

No matter how the owner responds (if at all), if you do not get paid, you have to file a lien action in order to preserve your lien. This is called ‘perfecting’ the lien. Specifically, you must file a Statement of Claim with the Nova Scotia Supreme Court within 105 calendar days of the last day of work in order to perfect the lien and prevent it from expiring. There is a fee for doing so. 

The 105 calendar days starts running from the last day of work, not from the date that you register your lien. Any negotiations you are in with the owner will not stall or change this deadline in any way, so be sure to keep close track of it.

The Statement of Claim must set out all the facts that you will need to rely on to prove your claim, the causes of action you have against the defending parties, as well as the amount of damages you are claiming. You should hire a lawyer to help you draft and file the Statement of Claim, as there are a number of rules around what must be included in these types of documents, and also what is not proper to include. It may be possible to claim breach of contract or other causes of action in addition to making a lien claim, which is a complicated decision that you will likely need a lawyer to help you with. 

You will need to file several copies of the Statement of Claim- one for the court, one for you, and one for each of the other parties you are claiming against.  The court will stamp all the copies when you file them.  The court will keep one copy and give you the rest. You must then 'personally serve' these copies on each of the parties. You must do that within 30 days of filing.  Personal service means the document must be handed to the person and the person must identify themselves.  Personal service cannot be done by mailing documents to someone, or using a courier, fax, or registered mail. If the person being served has a lawyer, that lawyer may accept service for their client. You should check with the lawyer to make sure they will accept service of the documents.  To serve a company, you have to hand the document to the Recognized Agent for the company.

If you do not want to personally serve the parties yourself, you can hire a process server to do it for you.  Professional process servers may also be called 'bailiffs.' You will have to pay a fee for this service. 

Step 3 Register the lien action

The lien action that you file with the Nova Scotia Supreme Court must be registered with the Land Registry in order for your lien to be perfected. You must do this within 105 days of the last day of work.  Your lien will expire if you do not register the lien action with the Land Registry.

To register your lien action with the Land Registry, you must draft a document called a Certificate of Lis Pendens.  A Certificate of Lis Pendens is a document that says a lawsuit to perfect the lien has been properly started.  You must file the Certificate of Lis Pendens with the court at the same time as filing your Statement of Claim. The court will stamp and sign the Certificate of Lis Pendens, which you must then register with the Land Registry.

I want to register a lien but I am being told that I agreed I would not register one, what do I do?

The Builders' Lien Act says that unless you are a manager, officer or a foreman, a spoken or written agreement that you will not exercise your right to make lien claim is null and void. This means that you cannot give up your right to make a lien claim. You might voluntarily choose not to register a lien but no one can stop you from making a lien claim by insisting that you, or someone on your behalf, agreed beforehand not to make a claim.

What is a holdback?

The law requires owners and each contractor in the construction chain to keep or ‘hold back’ 10 percent from each payment they make to every contractor and sub-contractor. This percentage is known as the holdback. All the amounts held back by all of the owners and contractors in the chain form what is known as the lien fund. The lien fund is the pool of money that lien claimants can resort to if they are not paid. 

The holdback must be held for 60 days after the work has been ‘substantially performed’. Work is deemed to be substantially performed under the Builders' Lien Act when 

(1) the work or improvement is ready for use or is being used for the purpose intended; and
(2) the work to be done under the contract is capable of completion or correction at a cost of not more than two and one-half per cent of the contract price.

Once these two requirements have been met, the owner/contractor must release the holdback to the contractor/supplier(s) below them in the construction chain.

If after substantial performance there is still some work to be done on the property to make sure that it is 100 percent completed, the owner/contractor is then required to hold back 10 percent of the value of that remaining work. This “finishing holdback” must be retained until 60 days have passed from the date of ‘total performance’ (i.e. when the project is 100 percent complete). 

Subcontractors may apply for the early release of part of the holdback if they finish their work on a specific aspect of the project before the entire project is complete, and they want the remaining 10 percent of their money as soon as possible. To do this, subcontractors must get the consultant on the project to certify that they have substantially performed the contract. If there is no consultant, then the owner and the general contractor have to jointly certify that the work has been substantially performed. 60 days after certification of substantial performance (assuming no liens related to that subcontractor’s work are filed), the owner can then reduce its project holdback by the amount of the subcontractor’s holdback and release that amount to the general contractor. The general contractor can then release that same amount to the subcontractor. 

Owners must give notice that the general contractor has reached substantial performance of its contract. Specifically, owners are required to post notice on the Construction Association of Nova Scotia website and also at the jobsite in a prominent location.  However, these notice requirements do not apply to property that is:

(1) owned and occupied by the owner and/or their spouse or common-law partner;
(2) for single family residential purposes; and
(3) where the value of the work is for $75,000.00 or less. 

What do holdbacks have to do with my lien claim?

An owner or contractor’s liability to sub-contractors further down the construction chain with whom they do not share a contractual relationship is capped at the holdback amount of 10 percent. Therefore, when a lien claim is made by anyone other than the general contractor, the holdback limits the extent of an owner or contractor’s liability to 10 percent of the payments they have made to sub-contractors, or the amount still owing to the general contractor (for example, unpaid progress payments for work performed).

Can an owner have a lien removed from their property before a trial is held to decide the lien claim?

If the parties settle before the matter goes to trial, the lien will be removed as a condition of the settlement. However, even if the parties do not settle, the owner can still remove the lien from the property before trial. To do so, the owner must post the amount of the lien claim plus 25 percent into court to be held until the claim is decided. The money is typically posted in the form of a lien bond from a surety company, or a letter of credit or certified cheque from a bank. This essentially shifts the security from the property to the court. This is known as ‘vacating’ the lien, and is often done by owners who want to get the lien off their property quickly so they can sell it or finance it. A court application might be necessary in order to vacate the lien, however if the parties consent, the court will typically make an order without the need for the parties to appear in court.

What happens if I miss a deadline, or do not want to make a lien claim?

If you have missed a deadline for registering or enforcing your lien, or if you do not want to make a lien claim at all, you may be able to sue the person or company you have a direct contract with in either Small Claims Courtor the Supreme Court of Nova Scotia for money that is owed to you. If you are suing for under $25,000, you should make the claim in Small Claims Court. This will be a regular breach of contract claim, not a lien claim. This means you will be following the normal processes of either the Small Claims Court or Nova Scotia Supreme Court. If after you get your judgment the person who owes you money doesn’t pay you, you would have to take steps to enforce the judgment.  See, Enforcing a Small Claims Court Order: A Guide for Creditors at courts.ns.ca

What is a breach of trust claim?

If you missed a deadline and you can no longer make a lien claim you may be able to make a claim for a “breach of trust”. You have to make a breach of trust claim in the Supreme Court of Nova Scotia regardless of whether the claim is for less than or more than $25,000, as Small Claims Court cannot deal with breach of trust claims. You will most likely need a lawyer to make a breach of trust claim for you.

The law says that money an owner gets to fund a construction project is held “in trust” for the benefit of contractors on the project until it is paid to the contractors. This means that even though the money is in the owners’ hands, the law trusts that the owner will hold this money for the contractors. If the owner does not pay the contractors this money they can be said to have broken this trust agreement and the court may find that they have committed a “breach of trust”.

Similarly, the law says money a contractor or a subcontractor gets for other subcontractors, labourers and/or suppliers is held in trust for other subcontractors, labourers and/or suppliers even though the money is in the hands of the contractor or subcontractor. If the contractor or subcontractor uses the money for their own purposes and fails to the pay the subcontractors, labourers or suppliers, the court may find that they have committed a breach of trust.

Courts have said that the duty of the trustee to preserve the trust fund for the benefit of workers and suppliers is an ongoing one and does not end until all work has been completed and all workers and suppliers have been paid amounts owing by the trustee. However, this obligation is only owed to those people directly below the trustee in the construction pyramid. That is, the only beneficiaries of the trust are those who have a direct contract with the contractor who owes them money. The courts have said that once a contractor has paid those directly below her in the construction pyramid, she has fulfilled her trust obligations. Bringing a breach of trust claim in Supreme Court may be particularly important where you have missed deadlines and cannot bring a lien claim anymore or where the person who owes you money might be declaring bankruptcy. 

Do I need to hire a lawyer?

This can be a complicated area of law. It is a good idea to hire a lawyer for advice about registering and enforcing a lien.

A lawyer can help you:

• decide whether it is worth it for you to file a lien
• prepare your affidavit, which is a sworn statement by you attesting to the truth of your claim. The affidavit must accompany your claim form when you first register your lien
• accurately fill out and file the appropriate forms
• follow the time limits in the Builders' Lien Act 
• assist you with a breach of trust claim, or
• negotiate payment, possibly avoiding the time and cost of going to court.

If negotiations are not successful, you will likely need a lawyer to handle the proceedings through the Nova Scotia Supreme Court. A lawyer can also give you advice on whether you should go ahead and sue on your own in Small Claims Court instead of making a claim for a lien. You can sue in Small Claims Court if you are asking for less than $25,000. However, you will not be making a lien claim, you will just be suing for money. You are allowed to represent yourself in Small Claims Court.

Can a person register a lien if I did not hire them?

Yes. Liens are available to contractors as a remedy precisely because contractors do not have a direct contract with the property owner that would provide them with a common law remedy for breach of contract. A lien claimant may register a lien even if you did not directly hire them to work on your property. They may have been hired by your contractor, or a subcontractor.

For example: You hired a general contractor to build your house, and have been making regular payments to him. Your general contractor subcontracted an electrician to do the electrical wiring in your home, but failed to pay her for the work. The unpaid electrician can register a lien against your property. Equally, if the general contractor paid the electrician, but she did not pay her employee who worked on the project with her, the electrician’s employee can register a lien against your property.

Can a person register a lien if I dispute the debt?

Sometimes there are disagreements about the quality of work done on a property. There may be deficiencies in the work, or the amount claimed under a lien is disputed. Disputes over the quality or completeness of the work done do not interfere with a contractor’s right to register their lien against your property and file a lien claim in Supreme Court. 

Ultimately it would be up to the court to decide, after hearing from all sides, whether the lien claim is valid and how much money is owed, if any.

How do I defend against a lien claim?

As noted above, the contractor has to register their lien with the Land Registry no more than 60 days after their last day of work on the property. From there, they have to file a Statement of Claim with the Nova Scotia Supreme Court, and file a Certificate of Lis Pendens with the Land Registry, within 105 days of the last day of work.

An owner who thinks that the lien is not valid for some reason can defend the lien claim by filing a Notice and Statement of Defence (see How to Defend an Action) with the Nova Scotia Supreme Court. In that Defence, the owner should explain the significant facts and explain why they think the lien claim is invalid. 

If possible, owners (or general contractors on behalf of owners) should keep track of what contractors are on their property and when. This may enable them to challenge the lien claim on the basis that the contractor failed to meet one of the deadlines set out under the Builders' Lien Act. One of the easiest ways to defend a lien claim is to state that the lien claimant did not register their lien within 60 days of their last day of work on the project. If the owner is confident about that argument, they could even file a motion to discharge the lien on that basis alone. Courts apply the deadlines set out under the Builders' Lien Act very strictly. 

How do I have the lien removed from my property once the claim is decided or settled?

If you settle with the contractor before a law suit (action) has been started you may have a lien removed from your property by registering a Receipt in Discharge of Lien signed by the lien claimant with the Land Registry. However, if an action has been started, then you must file a Consent Dismissal Order with the court, and then register a Discharge of Lien and Affidavit of Verification with the Land Registry.  

If a lawsuit has already been started the court will decide whether or not the contractor, subcontractor, labourer or supplier is entitled to the money they are asking for. If you want the lien removed from your property before the court decides the case, you would need to apply to the Supreme Court to ask for an order to have the lien removed.

An owner can also remove the lien from the property before trial without settling with the contractor. To do so, the owner must post the amount of the lien claim plus 25 percent into Court to be held until the claim is decided. The money is typically posted in the form of a lien bond from a surety company, or a letter of credit or certified cheque from a bank. This essentially shifts the security from the property to the Court. This is known as ‘vacating’ the lien, and is often done by owners who want to get the lien off their property quickly so they can sell it or finance it. A court application might be necessary in order to vacate the lien, however if the parties consent, the court will typically make an order without the need for the parties to appear.

What are my holdback obligations as an owner?

As an owner, you are required to hold back 10 percent of what you pay to the company or person directly below you in the construction chain during construction. This amount that you are holding back is called the ‘lien fund’, and as owner, you are the trustee of that fund. This is the pool of money that lien claimants can resort to if they are not paid. 

The holdback requirement is explicitly set out in the Builders' Lien Act, and failure to comply with it could mean that you will be forced to pay double for the same work. If, for example, you pay your general contractor the full amount of their contract price instead of holding back 10 percent, there is a risk that, if the general contractor is unable to pay their sub-contractors, those sub-contractors will seek payment from the lien fund. If you did not keep a lien fund, then you as owner are liable up to the holdback amount to pay any sub-contractors, even though you have already paid the holdback to the general contractor for that work. It is therefore very important for owners to hold back the 10 percent amount to protect themselves from this risk. 

The holdback must be held for 60 days after the work has been ‘substantially performed’. Work is deemed to be substantially performed under the law when 

(1) the work or improvement is ready for use or is being used for the purpose intended; and
(2) when the work to be done under the contract is capable of completion or correction at a cost of not more than two and one-half per cent of the contract price.

Once these two requirements have been met, the owner/contractor must release the holdback to the contractor/supplier(s) below them in the construction chain.

If after substantial performance there is still some work to be done on the property to make sure that it is 100 percent completed, the owner/contractor is then required to hold back 10 percent of the value of that remaining work. This “finishing holdback” must be kept until 60 days have passed from the date of ‘total performance’ (i.e. when the project is 100 percent complete). 

Subcontractors may apply for early release of part of the holdback if they finish their work on a specific aspect of the project before the entire project is complete, and they want the remaining 10 percent of their money as soon as possible. To do this, subcontractors have to get the consultant on the project to certify that  they have substantially performed the contract. If there is no consultant, then the owner and the general contractor have to jointly certify that the work has been substantially performed. 60 days after certification of substantial performance (assuming no liens related to that subcontractor’s work are filed), the owner can then reduce its project holdback by the amount of the subcontractor’s holdback and release that amount to the general contractor. The general contractor can then release that same amount to the subcontractor. 

Owners mustgive notice that the general contractor has reached substantial performance of its contract. Specifically, owners must post notice on the Construction Association of Nova Scotia website and also at the jobsite in a prominent location. However, these notice requirements do not apply to property that is:

(1) owned and occupied by the owner and/or their spouse or common-law partner;
(2) for single family residential purposes; and
(3) where the value of the work is for $75,000.00 or less.

You should get legal advice about your particular situation.

Do I need to hire a lawyer?

This is a complicated area of law.  It is a good idea to hire a lawyer for advice about defending a lien claim, which make include counter-claiming against the contractor for deficiencies that the owner had to pay to repair, negotiating with the contractor, or removing a  lien from your property.

COVID-19 and postponing mortgage payments

If you've lost income because of COVID-19 and can't afford to pay your mortgage, you may be able to defer (postpone) payments. The first step is to contact your lender to find out what your options are.  Check your lender's website too as it will have the most up-to-date information.  Remember that deferring your mortgage payments may be a short-term emergency option, but make sure you understand what a mortgage deferral means and that you also take steps now to make a financial plan for the future.  Here are some resources that may help:

• Government of Canada's COVID-19 Economic Response Plan
• Canadian Bankers Association Mortgage deferral
• Canada Mortgage and Housing Corporation Dealing with mortgage payment difficulties
• Canada Mortgage and Housing Corporation: Understanding Mortgage Payment Deferral

Default

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 mortgage terms. The most common default is not making mortgage payments when they are due.

Failure to make mortgage payments is not the only form of default. Mortgages have many promises the borrower must follow. Breaking any of these promises can be a 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.

Most mortgages have an ‘acceleration clause’, which usually says that if you miss a payment the entire amount owing on the mortgage becomes payable right away.

Can the lender take my house if I miss payments?

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.

When you arrange a mortgage, it is a contract between you and the lender, where you agree to pay back the principal and interest according to a set schedule. 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. The house is security for the loan. 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 a public auction. 

Lenders usually do not want foreclose, and will make reasonable efforts to allow you to get back on track so you can keep your home, including refinancing or setting up a payment plan. 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 costs can quickly add up and make it harder for you to resolve.

Demand Letter

Demand letter: Before taking legal action the lender or their lawyer will usually send you a demand letter.  By the time a Demand Letter is sent the lender has usually already hired a lawyer, which will increase the amount of money the lender is looking for to bring the mortgage up to date.

A demand letter:

• tells you why you are in default (for example, you have 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 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. Try to negotiate with the lender or their lawyer to get your mortgage back on track if possible
• Ask whether you can refinance, to lower your mortgage payments and pay them over a longer period
• Try speaking with a new lender to see if you can get a new mortgage to pay off the original mortgage
• Get help from a credit counsellor or licensed insolvency trustee
• Consider putting your property up for sale.

Notice of Action and Statement of Claim

The lender files these documents with the court to start the court process to enforce the mortgage and the outstanding debt.

Notice of Action and Statement of Claim: If you do not respond to a demand letter before the deadline in the letter, or cannot negotiate an agreement with the lender, the lender, may start the foreclosure court process.

The lender starts the foreclosure process 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 just drop off in your mail box or courier to you, unless the lender has the court's permission to have you served (notified) in an alternative way, called substituted service. However, a court generally only grants substituted service if the lender is able to show that 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.

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 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, and 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 (Foreclosure Order) if the total amount of the mortgage, interest and costs are not paid
8) 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 claim for Judgment against you for the amount of the outstanding debt, and a Foreclosure Order if that Judgment debt is unpaid.

The "standard" Notice of Action and Statement of Claim forms come from Nova Scotia’s Civil Procedure Rules. The rules are available online at courts.ns.ca

What are my options if I get a Notice of Action and Statement of Claim

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 be:
  • paying the arrears and costs, or
  • paying the entire principal debt, interest and costs - including legal 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.

Filing a Defence

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 there is a Free Legal Clinic in most parts of the province, for people who are going to 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; 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 do not 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:

1) The mortgage was not signed
2) You never got 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 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.

If you 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 a Foreclosure Order. This court application is called a Motion, and is usually ‘ex parte’, which means without notice to you. The idea is that you already got notice 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 lenders's Motion for a Foreclosure Order, the judge can:

• Ask for more information or better proof of the mortgage debt
• Order that others be there before the judge hears the case
• Direct the sale of the property by granting a Foreclosure Order.

Can foreclosure be stopped?

Maybe. Some possibilities are: negotiating; redeeming the mortgage; reinstating the mortgage; filing 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 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.  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.
  

Apply to Supreme 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 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 to court to discontinue the foreclosure before the court has made a Foreclosure Order (see ‘If I do not file a Defence’).

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

Will bankruptcy 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 focus on paying the mortgage, and may also help deal with any deficiency claim after sale of the property at public auction. You should talk to a licensed insolvency trustee about your financial situation and your options. Go to the bankruptcy page for more information, or contact the federal Superintendent of Bankuptcy.

Can I still sell my house?

Yes, you may try to sell the house or property up until the date of the public auction.

Can the lender refuse payments once a court process starts?

Nova Scotia’s Judicature Act gives you the right to a discontinuance of 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 the court issues a Foreclosure Order. 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. Contact a lawyer in private practice, or there is a Free Legal Clinic in most parts of the province for people who are going to 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.    That is, if you already reinstated the mortgage once by paying all arrears and legal costs, and then defaulted again,  you would not be able to reinstate the mortgage a second time if 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 interest, costs and out-of-pocket expenses.

Who are the plaintiffs 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
• Licensed Insolvency Trustee,  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.

Sale of the Property

If the lender is successful on their Motion, a Foreclosure Order will be issued directing that the home be sold at public auction.

Public Auction:

After the court grants a Foreclosure Order, the home will be sold by public auction.  The auction is done by a court-appointed Auctioneer, or in some cases, by the Sheriff.  

The property will be sold at a public auction at the courthouse or Justice Centre in the judicial district where the property is located.

The plaintiff (lender or their lawyer) must:

• advertise the sale of the property in a newspaper approved by the court. There must be at least two advertisements - the first at least 15 business days before the public auction, and the second within 7 business days of the public auction;
• at least 15 before days before the public auction, 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 public auction.

Private Sale:

Although unusual, if the lender has an offer to purchase the property from a third party and all subsequent encumbrancers agree, 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.

Can the lender buy the property on foreclosure

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

Public Auction process

The Auctioneer or Sheriff 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 business days to pay the rest. If you are the successful bidder, and you have not paid the rest within the 15 business days, you will lose your 10% deposit, as it will be applied against the auction costs and the debt 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 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 and the property will go to the next highest bidder. The Auctioneer or 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 Auctioneer or Sheriff gives you a short time to get the funds, in practice it is as little as 15 minutes. Therefore, if you want to be the successful bidder, you should make sure you have 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 net sale proceeds of the property.

Deficiency Judgment explained

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 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 reflects 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 public auction.

What if the sale price is more than the amount owing

Surplus: If the sale of the property from the public auction brings in more money than the amount of Auction costs, outstanding taxes and the amount owed to the plaintiff, the Auctioneer or Sheriff pays the surplus into 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 a claim, and the priority of that claim. The Court may then order that the surplus be distributed to those entitled.

You should try to get legal advice if you wish to make a claim for surplus.

Can the sale be overturned

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.

What happens once the property is sold

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 Deed to the property has been delivered to the successful bidder.

What happens once the 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 public auction has taken place and that the foreclosure process is complete. The lender must also file:

1) The Report; and
2) An affidavit (usually prepared by the Plaintiff’s lawyer) confirming that the advertisements were placed and the notices were sent following the requirements of the Foreclosure Order.

How soon do I have to leave the property

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 Foreclosure Order 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 Foreclosure Order has has been issued (made) - although this would be unusual.

Lenders generally don’t request vacant possession (require that you leave) until the date of the sale at public auction. When the 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 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.

How long foreclosure takes

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.

More help and information

• 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 not sure about what to do.
  
  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 - 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. Here are some ways to find a lawyer in private practice.
  
  There is also a Free Legal Clinic in Halifax, Sydney, Yarmouth and Truro for people who are going to Supreme Court without a lawyer.
  
  
• 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
    
    
• A trustee in bankruptcy, also called a Licensed Insolvency Trustee can provide professional advice about your options for dealing with debt.  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 - 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 in a number of ways, such as a debt management plan, budgeting, wise credit use, and general money management. The Financial Consumer Agency of Canada  - has information about how to find a reputable Credit Counselling service: www.fcac-acfc.gc.ca.
  
  
• Debtor Assistance Program, offered through Service Nova Scotia. Provides free help with managing your money, dealing with creditors, and consumer proposals, but cannot adminster bankruptcies (you need a licensed trustee for a bankruptcy).  Contact the Debtor Assistance Program at 1 800 670-4357 or 902-424-5200, or online at gov.ns.ca/snsmr/access/individuals/debtor-assistance.asp
  

• Financial Consumer Agency of Canada, or call 1 866 461-3222.  Lots of consumer information on many money related topics.
  
  
• University of King's Investigative Workshop, "Foreclosed" - July 2019 news article about the Foreclosure process in Nova Scotia 

What is property tax?

The city collects property taxes from property owners. Property taxes are one of the most important ways money is raised to pay for things like schools, fire and police departments, streetlights and community centres.

How is property tax collected?

Your municipality will send out a tax bill.  For example, in the Halifax Regional Municipality the city sends a tax bill every six months. Payments are due at the end of April and the end of October. The Cape Breton Regional Municipality sends an interim tax bill in April, and a final tax bill in September. Please check with your local municipality for details in your community.

You can generally pay your property taxes in several ways, including: online banking, online credit card payment, in person with a cheque or money order, or as part of your mortgage payment.

How is property tax calculated?

Property taxes are calculated as a percentage of the value of the property. The value of a property or “assessed value” is determined by a not-for-profit organization called the Property Valuation Services Corporation (PVSC).

Assessments are determined by market value, which varies by community and type of home. Tax rates are set by the city, looking at services provided (e.g.,fire, police, schools, sidewalks, transit), along with mandatory contributions for services such as education and corrections.

Are property tax calculations based on the value of the house or the property (land)?

Property taxes are based on the market value, or the price a willing seller would receive from a willing buyer for the property. Any houses or buildings that are on a property affect its value. For example, a property with a house will usually have greater value than a property with no house.

I disagree with the assessed value of my property. What can I do?

You have the right to appeal your property assessment if you disagree with it. You must appeal within 31 days of receiving your Assessment Notice in the mail or epost.

Assessments are mailed out in January each year. You can appeal your assessment by mailing or faxing an appeal form that explains why you are appealing the assessment to the PVSC. The appeal form is attached to your Assessment Notice, and must be received by the PVSC by the date (deadline) indicated on your Assessment Notice.

Contact PVSC toll free at 1-800-380-7775 or visit their website at www.pvsc.ca/en/home/howassessmentworks/appealinformation/default.aspx for more information about the appeal process.

What happens if I don’t pay my property tax?

If your property taxes are not paid on time, the account will fall behind. This is called being “in arrears”.

If this happens, interest will be charged on the amount you owe. For example, in the Halifax Regional Municipality the interest rate charged for accounts that are in arrears is 15% per year (for example if you owe $1,000, after one year you would owe an additional $150 – a total of $1,150).  The interest rate on arrears may differ in other communities across the province, so check with your local municipality.

If property taxes remain unpaid for more than one year, the city has the option of selling the property at a tax sale, or trying to sue on the debt as an alternative to a property tax sale.

What is a tax sale?

Property can be sold at auction if property taxes remain unpaid for more than one year. These tax auctions or sales are open to the public.

The city must try to notify the owner as well as all lien holders about the upcoming tax sale. Notice must be sent by registered letter.

The owner will receive information indicating:

• amount owed
• how much time left to pay
• date of tax sale, and
• estimated extra expenses that could be added.

When it is not possible to notify the owner, the property is posted with a Tax Sale Notice, which is stuck on the door of the property. Properties are sold for the amount of outstanding taxes, interest and expenses owed to the government, which is usually much less than the market value of the property.

Are there programs to help with paying property taxes?

Paying property taxes is an essential part of owning property. Municipalities across Nova Scotia offer some tax relief options, including tax payment deferrals or exemptions for those who have a lower income.  Please check with your local municipality to find out what options are available in your community.

The Halifax Regional Municipality offers three tax relief programs that may help prevent property owners from falling behind on their tax bill, or help if you have already fallen behind on payments. The three programs are payment plans, rebates and deferrals. It is possible to combine these programs or use them individually.

PAYMENT PLAN Instead of making two large property tax payments in April and October, smaller payments can be made every month.

PROPERTY TAX REBATE Rebates are available if the combined net income of the adults living at a property is less than $32,000 per year. The rebate amount is calculated based on the combined income of the adults at the property and the amount of tax owed. This program can change from year to year and is tied in with the cost of living (consumer price index).

DEFERRAL OF PROPERTY TAX PAYMENTS Tax payments can be put off (“deferred”) if the combined income of the adults living at a property is less than $32,000 per year. Owners can choose to defer their entire payment, or just a portion of it. A small interest rate is charged to the deferred tax amount. The interest rate on deferrals in 2014-2015 is around 1%. This program can change from year to year and is tied in with the cost of living (consumer price index). The deadline to apply for these programs is March 31 each year, although this deadline is subject to change, so check with HRM. To apply you must provide proof of income based on your Notice of Assessment (received from the Canada Revenue Agency after income taxes are paid) and an application signed by the property owner. Depending on the individual circumstances, you may need to provide supporting documents to assist with the application. The HRM is pleased to assist those interested in these programs to complete their applications over the phone.

Some legal words you need to know

Arrears – money that is owed and should have been paid earlier. The amount accumulated from the date when the first missed payment was due.

Lien holders – someone who has a right or potential claim against someone’s property. The lien holder is usually a bank or another financial firm. For example a person or financial institution has given you money on loan to buy property or has made improvements to the property.

Market value – amount the property would probably sell for on the open market, with buyer and seller making an informed, voluntary deal. All real property is assigned a market value assessment by professional assessors employed by Property Valuation Services Corporation, on behalf of the Province. This value is based on such factors as construction quality, location and age of the property. This value may be adjusted annually to reflect changes that could go up or down in the market value of property in your area.

Notice of Assessment – a notice sent to property owners advising them of the current assessed property value for property (municipal) tax purposes.

Property assessment – the process of establishing a dollar value for property for property tax purposes. Property Valuation Services Corporation (PVSC) – responsible for property assessments in Nova Scotia.

Taxable Assessed Value – the assessment used to determine annual property taxes.

Property Valuation Services Corporation (PVSC)

Property Valuation Services Corporation (PVSC)
Website: www.pvsc.ca
Telephone: 1-800-380-7775

Your municipality

Halifax Regional Municipality (Halifax)
Taxes Website: www.halifax.ca/taxes
Telephone: call 311 or 902-490-5016

Cape Breton Regional Municipality (CBRM)
Website: www.cbrm.ns.ca/Telephone: 902-563-5025 or 902-563-5080 (Citizen Service Centre)

Click here to find your municipality.

Legislation that applies

Nova Scotia Assessment Act
Nova Scotia Municipal Government Act