When mortgage payments stop, lenders have legal rights to recover their money through foreclosure. This process in British Columbia follows strict rules that protect both lenders and borrowers. Understanding these steps helps property owners know their rights and options when facing foreclosure.
At Legalbird, our foreclosure lawyers will guide clients through every stage of foreclosure proceedings, whether you’re a lender seeking to recover funds or a homeowner trying to save your property. Our team knows how stressful foreclosure can be, and we work to find practical solutions that protect your interests.
Required Notices Before BC Foreclosure
Bankruptcy and Insolvency Act Notices
Before starting foreclosure, secured lenders must follow federal rules under Section 244 of the Bankruptcy and Insolvency Act. If the lender wants to enforce security against most of a borrower’s property, they must give formal notice and wait 10 days. This waiting period gives borrowers time to negotiate or reorganize their finances.
The notice must be delivered properly through personal delivery, registered mail, courier, or electronic transmission if both parties agreed to this method.
The 10-day period stops applying if:
- The borrower declares bankruptcy
- The borrower files a proposal that excludes the lender
- A receiver is appointed for the borrower
- The court lifts the statutory stay for the secured creditor
Farm Debt Mediation Act Requirements
Farmers have special protection under the Farm Debt Mediation Act. Lenders must give written notice at least 15 business days before taking any enforcement action. This notice tells farmers about their right to apply for mediation to potentially resolve the debt issue.
The definition of “farmer” is broad and includes individuals, partnerships, or cooperatives engaged in commercial farming. This covers production of crops, livestock, dairy, honey, maple syrup, and other agricultural products. If lenders don’t follow these rules, their enforcement action becomes null and void.
Starting the BC Foreclosure Process
Important Timelines and Deadlines
British Columbia foreclosure proceedings follow strict timelines. The typical process takes 7-12 months from start to finish, though complicated cases may take longer.
Missing deadlines can have serious consequences for both lenders and borrowers, making legal guidance essential.
Filing a Petition
Foreclosure in BC starts with filing a petition in Supreme Court under Rule 21-7. The petition and supporting documents must be served on the borrower and anyone else whose interests might be affected by the foreclosure.
Respondents who must be included:
- All parties liable under the mortgage
- Subsequent charge holders
- Tenants with registered leases
- Co-mortgagees
- Anyone with registered interests on the property
- The Crown (if there are potential tax liens or Crown interests)
The petition must be filed in the Supreme Court registry closest to the mortgaged property. For example, property in Surrey would be filed in New Westminster, while Vancouver property stays in Vancouver. Courts can transfer cases filed in the wrong registry.
Combining Related Debts and Guarantees
Rule 21-7(3) allows lenders to include related claims in the foreclosure petition. These might include claims under general security agreements or personal guarantees connected to the mortgage debt. Combining related claims saves time and reduces court costs for everyone involved.
The Order Nisi: Setting the Rules
After filing and serving the petition, the court holds a hearing to grant an order nisi. This order establishes several critical elements that guide the rest of the foreclosure process.
The order nisi typically includes:
- Confirmation that the borrower is in default
- The exact amounts required for redemption (principal, interest, and costs)
- Priority of different creditors and who gets paid first
- The redemption period (typically six months)
- Liberty for the lender to apply for subsequent relief, such as order absolute or approval of sale
- Recovery of costs incurred to date
The court has broad powers at this stage. Under Rule 21-7(5), it can:
- Grant a final order of foreclosure
- Fix a redemption period and foreclose if payment is not made
- Determine or certify amounts due, including interest
- Resolve priority disputes between respondents
- Authorize the sale of mortgaged property
If serious disputes arise that can’t be resolved with documents alone, the court may convert the foreclosure to a full trial. Having a skilled litigation lawyer can help you avoid the many pitfalls that can arise in scenarios where you foreclosure dispute goes to trial.
Redemption of the Mortgage
During the redemption period, borrowers can save their property by paying the full amount specified in the order nisi. This includes the principal debt, accumulated interest, and the lender’s legal costs. Partial payments don’t allow partial redemption—borrowers must pay everything or risk losing the property entirely.
If borrowers can’t agree with the lender on costs, Rule 21-7(10) allows them to pay the principal amount and have the court assess reasonable costs later. This prevents lenders from inflating costs to make redemption impossible.
Order Absolute: Final Foreclosure
If the redemption period expires without payment, the lender can apply for an order absolute. This transfers full ownership of the property to the lender and extinguishes all the borrower’s rights. The lender becomes the new owner and can take immediate possession.
Courts may grant immediate orders absolute in exceptional cases without waiting for the redemption period. This happens when the property value is clearly less than the debt, or when the property is deteriorating and losing value. After the redemption period expires, borrowers must show strong reasons to get an extension.
Even after an order absolute, courts can sometimes reopen foreclosure if the borrower acts quickly, shows they can now pay, and demonstrates that unforeseen circumstances prevented redemption. However, these cases are rare and require compelling evidence.
Order for Conduct of Sale
Instead of taking ownership through an order absolute, lenders often prefer selling the property. An order for conduct of sale authorizes the authorized party to list and market the property, usually through the Multiple Listing Service. This approach often recovers more money than foreclosure.
The order typically grants conduct to the first mortgagee after the redemption period expires. Subsequent mortgagees should apply for conduct of sale before the redemption period ends if they want to control the sale process.
Listing agreements should clearly state:
- All offers require court approval
- The agreement terminates if redemption occurs or the mortgage is assigned
- Commission is only payable upon completion of a court-approved sale
- Purchasers accept the property “as is” and must complete their own inspections
Order Approving Sale
After securing an accepted offer, the petitioner applies for court approval of the sale. Notice should be provided to all respondents, even those who haven’t filed responses. Court approval is discretionary and protects all parties’ interests.
The court examines whether the property was properly marketed, exposed to enough potential buyers, and whether the price reflects fair market value.
Competing bids are often submitted in sealed envelopes with deposits secured. While the highest bid usually wins, courts may approve lower offers with better terms, such as faster closing dates or fewer conditions.
Sales near the end of the redemption period are usually approved if reasonable. The mortgagee must act in a businesslike manner throughout the process. Courts may also approve backup offers in case the primary sale fails, though this can sometimes lead to extended litigation.
Protecting Your Interests in a BC Foreclosure
Whether you’re facing foreclosure or pursuing it, having experienced legal counsel makes a significant difference. Foreclosure law is complex, with many procedural requirements that must be followed exactly. Simple mistakes can delay proceedings for months or invalidate actions already taken.
Led by experienced foreclosure litigator Kawal Atwal, Legalbird’s team understands both sides of foreclosure proceedings. We help lenders recover their investments efficiently while ensuring borrowers understand their rights and options. Our approach focuses on practical solutions that minimize costs and stress for all parties.
Don’t wait until it’s too late. If you’re dealing with mortgage default or foreclosure issues, contact Legalbird for a 30-minute free consultation. We’ll review your situation, explain your options clearly, and help you understand the best path forward.
Call us now to protect your property interests and secure your financial future.
