Facing foreclosure can be an overwhelming and emotionally charged experience. In Alberta, the foreclosure process is governed by legal rules designed to protect both the lender and the borrower. If you’ve fallen behind on mortgage payments and are concerned about the possibility of losing your home, it’s essential to understand how foreclosure works, what your rights are, and what steps you can take to protect your interests.

This blog will walk you through the key stages of the foreclosure process in Alberta, explain the legal options available to you, and provide guidance on navigating this difficult time with as much clarity and control as possible.

Understanding Foreclosure in Alberta

In Alberta, foreclosure is a legal process that allows a mortgage lender to recover the amount owed on a defaulted loan by taking ownership of the mortgaged property and selling it. Unlike some provinces that use a “power of sale” approach, Alberta uses judicial foreclosure, meaning the lender must go to court to initiate and complete the process.

The goal of foreclosure is to allow the lender to recover the loan amount and ensure the process is carried out fairly. Because it is a court-supervised procedure, some checks and balances allow homeowners the opportunity to respond, raise defences, or seek alternatives.

When Does Foreclosure Start?

Foreclosure typically begins after a homeowner has missed two or more mortgage payments. The lender will usually attempt to contact the borrower to resolve the issue before proceeding with legal action. If no resolution is reached, the lender may serve a Demand Letter, asking the borrower to bring the mortgage into good standing within a specified timeframe, usually 10 days.

If the borrower does not comply with the Demand Letter, the lender can commence a foreclosure action by filing a Statement of Claim in the Alberta Court of King’s Bench.

Receiving a Statement of Claim

Receiving a Statement of Claim can be alarming. This legal document sets out the lender’s allegations, including the amount owed and the relief being sought, typically, the right to take possession of and sell the property.

If you receive a Statement of Claim, you have 20 days to respond by filing a Statement of Defence or a Demand for Notice. Failing to respond within this time allows the lender to proceed with unopposed foreclosure, potentially leading to quicker possession and sale of the property.

If you file a Statement of Defence, the matter may proceed to a hearing, where both sides present their case before a judge. This allows homeowners to raise any legal defences they may have, including errors in the mortgage documents or evidence that the default has been remedied.

Possible Outcomes of a Foreclosure Action

Foreclosure does not automatically result in the lender taking your home. There are several potential outcomes, depending on the circumstances of your case:

1. Redemption Period

In many cases, the court grants a redemption period, typically three to six months, during which the borrower can repay the outstanding mortgage arrears, bring the mortgage current, or refinance the debt. If you can do so, the foreclosure action may be discontinued.

2. Judicial Sale

If the redemption period expires without repayment, the lender can request that the court approve a judicial sale of the property. This involves the court authorizing the sale of your home to recover the debt owed. The sale must be conducted commercially reasonably and often consists of listing the property on the open market.

3. Order for Foreclosure

If there is no equity in the property or a judicial sale is not viable, the court may grant the lender title to the property, extinguishing your interest. This is known as an Order for Foreclosure, which means the lender becomes the new legal owner of your home.

4. Possession Order

In addition to or instead of foreclosure, the court may grant a Possession Order allowing the lender to take physical possession of the home. Once this order is in place, the homeowner must vacate the property, and the lender may take steps to secure and market it.

What Happens to the Remaining Debt?

A common question is whether a homeowner is still responsible for any shortfall after the home’s sale. In Alberta, the lender may seek a deficiency judgment if the proceeds from the judicial sale do not fully cover the amount owed under the mortgage. This is particularly relevant for high-ratio mortgages (those with less than 20% down payments) or where property values have declined significantly.

However, if the court grants an Order for Foreclosure (giving the lender title to the property instead of selling it), the lender usually cannot pursue the borrower for any shortfall. This means that the borrower’s liability is extinguished, but they lose all equity in the property.

What Are Your Rights as a Homeowner?

Throughout the foreclosure process, Alberta homeowners retain certain rights and protections. These include:

• The right to receive notice of legal proceedings.
• The right to respond and defend against the foreclosure.
• The right to redeem the mortgage during the redemption period.
• The right to receive any surplus proceeds from a judicial sale, after the mortgage and legal costs are paid.

It’s also important to note that lenders must follow proper procedures and act in good faith. They must obtain court approval before selling the property and make reasonable efforts to obtain fair market value.

How Long Does the Foreclosure Process Take?

Foreclosure is not an overnight process. From the first missed payment to the final resolution, the timeline typically spans six months to over a year, depending on whether the borrower contests the action, whether the court grants a redemption period, and how long it takes to sell the property.

This window gives many homeowners the opportunity to explore alternatives, such as negotiating a repayment plan, selling the home privately, or filing a consumer proposal or bankruptcy if needed.

Can You Stop a Foreclosure?

In many cases, foreclosure can be stopped or delayed. Some of the most common ways to prevent foreclosure include:

• Paying the arrears and bringing the mortgage current.
• Negotiating with the lender for revised payment terms or a deferral.
• Selling the property privately before the judicial sale occurs.
• Refinancing with another lender to pay off the existing mortgage.
• Seeking legal advice to challenge the foreclosure based on errors or unfair conduct.

Even after the court grants a redemption period or Possession Order, borrowers may still be able to negotiate a resolution if their financial circumstances change.

The Importance of Acting Quickly

The most critical factor in a foreclosure case is timing. The earlier you act, the more options you have. Many homeowners delay taking action out of fear or denial, only to find themselves with fewer legal remedies as time passes.

If you receive a Demand Letter or a Statement of Claim, do not ignore it. Respond promptly and speak to a lawyer who can help you understand the process and plan your next steps.

Understand Your Options and Take Control

Facing foreclosure in Alberta is serious, but it doesn’t mean you are without options. The judicial foreclosure process includes several steps that provide homeowners with opportunities to respond, defend, and potentially resolve the situation. Understanding the stages of foreclosure, your legal rights, and the importance of early action can help reduce stress and improve your chances of reaching a more favourable outcome.

Getz Collins and Associates: Experienced Alberta Real Estate Lawyers

If your home is at risk of foreclosure or you’ve been served legal documents by your lender, acting quickly is crucial. The legal complexities and potential consequences of foreclosure make experienced guidance essential. Don’t wait to understand your options and protect your rights. Contact Getz Collins and Associates, experienced real estate lawyers serving Calgary, Strathmore, and surrounding areas in Alberta, to review your case, explore all available solutions, and determine the best path forward. Having an experienced advocate on your side can significantly impact the outcome, whether you are aiming to save your home, negotiate a fair sale, or minimize your financial liability. To discuss your real estate matter with our team, please contact us online or call 587-391-5600.