In Saskatchewan, the court exercises a supervisory role in foreclosure proceedings. This role is to ensure that the correct processes and law are followed, and to ensure a balance between borrowers and lenders. There is a distinct and nuanced process that must be followed and all subject to the court’s supervision.
A lender’s ability to enforce its interest under a mortgage also depends on the specific type of mortgage it holds. Under section 2 of The Limitations of Civil Rights Act, should the borrower default on the mortgage when a mortgage is a Purchase Money Mortgage, the lender’s only remedy is to foreclose on the land. The lender is prevented from suing for any amounts owing over and above the value of the land foreclosed upon.
However, if the lender has a mortgage that is not a Purchase Money Mortgage, and the borrower defaults, they have more expansive tools at their disposal to recover the loaned amount. In this scenario, the lender may force a judicially supervised sale of the land, while also proceeding to sue for any amounts owed over and above the proceeds of sale. This is a deficiency action — and has stringent rules and processes to be followed, all of which are supervised by the court.
Before approving any judicial sale, the courts require a significant amount of information from the lender when approving of such a sale, for example, reliable market data to determine if the proposed sale is commercially reasonable and evidence as to the efforts to market and sell the property. If the lender does not provide the court with this information, it could jeopardize the sale and the right to pursue a deficiency judgment altogether.
A recent Saskatchewan decision, Royal Bank of Canada v Pearl Boutique Ltd., 2020 SKQB 106 found that a proposed sale should be placed in front of the court for approval promptly, and the lender should act reasonably, based on recent and reliable data, when selling the land. In this case, the lender did not move swiftly and allowed the security to depreciate and as the Court found that they lost their ability to pursue a deficiency judgment.
In these times of flux and uncertainty, the courts will require significant amount of information in order to approve of judicial sale. Lenders should be careful to provide all the necessary information to the courts when seeking approval of a sale, to persuade the courts the sale is prudent and commercially reasonable. Further, lenders would be best served by taking measures to preserve their ability to claim deficiency judgement by staying apprised of the value of the lands, and do what is reasonable to maintain those valuations.
As always, the specific circumstances of each situation will require different approaches to ensure the optimal outcome. COVID-19 has presented many difficult and challenging circumstances, and we are here to help you navigate those circumstances. MLT Aikins can assist you in pursuing deficiency judgments, and otherwise navigating the foreclosure process.
Note: This article is of a general nature only and is not exhaustive of all possible rights or remedies. Readers should consult lease agreements for further rights and obligations. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.