An Alberta court recently rejected a bank’s application to shorten a six month redemption period to a one day redemption period.
The purpose of a redemption period is to stay the action to give the borrower a chance to sell, to obtain alternate financing, or to bring the mortgage up to date.
What Happened?
The case involved a conventional (non-insured) mortgage of a home near St. Paul, Alberta. The mortgage loan initially secured a debt of $142,900.
The homeowner had defaulted on his mortgage. After receiving a contact notice on May 23, 2019, the homeowner explained that he had been laid off, and was then in Europe because his father became ill and subsequently passed away. He explained that he had a new job and was getting a tax refund soon. He stated he would pay by May 28, 2019.
However, the bank made an application to the court to shorten the redemption period from six months to one day.
The bank claimed that the default had not been due to causes beyond the homeowner’s control and that, considering his ability to pay and its security, the period of redemption should be shortened to one day.
The Law
Section 41 of the Law of Property Act (the “Act”) provides that the redemption period for land other than farm land is six months.
However, a court may adjust this time period up or down. Section 41(2)(b) of the Actprovides an exhaustive list of factors:
41(2) In an action coming under subsection (1), the Court on application may decrease or extend the period of redemption having regard to the following circumstances:
…
(b) when the action is in respect of a security on land other than farm land,
(i) the ability of the debtor to pay,
(ii) the value of the land including the improvements made on it,
(iii) whether the land has been abandoned,
(iv) the nature, extent and value of the security held by the creditor,
(v) the earning capacity of the debtor, and
(vi) whether the debtor’s failure to pay was due to temporary or permanent unemployment or other conditions beyond the control of the debtor.
Decision
The court found the evidence showed that the default was caused by a temporary inability of the debtor to pay, which has been held to be a ground for extending, not shortening, a redemption period. It also suggested that the land had not been abandoned, that the earning capacity of the homeowner had recently been restored, and that the homeowner’s failure to meet the mortgage obligations was due to temporary unemployment as well as a further condition beyond his control.
The court further stated:
“This province is in a recession. This too, could count as a circumstance beyond a mortgagor’s control and may well be a factor to consider in determining the appropriate redemption period.”
The court then reviewed the value of the land and the value of the security held by the bank.
The court also examined the application materials submitted by the bank and stated:
“The Application claimed 17 heads of relief, only a handful of which were relevant or applicable to this case. To someone unfamiliar with foreclosure practice, these generic materials give little notice of the relief actually sought by the bank. In fact, to someone unfamiliar with foreclosure practice, they may as well have been in Latin.”
The court concluded:
“The relief sought by the bank is plainly not warranted on the basis of the materials on the court file. The bank’s entirely self-serving affidavit appears to be false and is contrary to other materials on the court file. This is no way to treat vulnerable individuals. It is what the Act is designed to prevent.
If the evidence on file proves anything, it proves that the mortgagor is entitled to at least a six month redemption period.”
As a result, the court denied the bank’s application for a one day redemption period.
Get Advice
For more than 25 years, the experienced litigation lawyers at DBH Law in Calgary have advised clients on a wide range of mortgage and foreclosure issues. We represent both borrowers and lenders in this highly technical and generally complex area of law. Our goal is to always resolve mortgage disputes and foreclosure issues quickly and efficiently and to bring them to the most satisfactory end for our clients.
Don’t let the fear of foreclosure prevent you from working towards a solution to your problem. Our knowledgeable team of lawyers and staff will be with you every step of the way, providing perspective by focusing on what’s important and working to keep your property in your hands. Please contact us online or by phone at 403.252.9937 to see how we can help you today.