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Foreclosure and Tenants Q&A

Blog by Sarah Penikett | October 5th, 2011

The following information is excerpted from www.tenants.bc.ca

Foreclosure and Tenants Q&A: What you need to know.

Foreclosure is what happens when the bank or another lender wants to take back the house or apartment you rent because your landlord can’t pay their mortgage. The lender brings a foreclosure action against the property owner to try to force him or her to either make good on the payments or sell the property and pay what is owed out of the proceeds. This can be annoying and stressful for you, as the contract the bank has with the landlord takes precedence over the contract you have with your landlord. There are several things you can do to best deal with the situation.

How do I know that my home is being foreclosed?

The lender brings forward a foreclosure against your landlord by filing a court petition. This is a document that sets out what the lender wants the court to do. As a tenant, you will often be named as a respondent to the petition and will likely be served with it in person. If the server cannot find you it is possible for you to be served by both being mailed a copy of the petition and another adult at your residence being served. Just because you are being served with court documents doesn’t mean you have done anything wrong and you should not panic. Usually nothing will happen to your home for at least six months, so you will have plenty of time to find a new place and get things in order.

It is possible that you will not be named as a respondent in the petition. If this is the case, a server will likely try to serve your landlord by bringing the petition to your residence. The server will serve your landlord with the petition by giving it to you, since you are an adult at the residence that is being foreclosed on. If this happens you should give your landlord the documents you were given right away. Call your landlord the next day and find out for sure what is going on and whether your landlord is facing a foreclosure action.

If the foreclosure proceedings start and you remain unaware that your residence is being foreclosed on, an appraiser could come by your residence to appraise the property in preparation to sell it. If you learn of the foreclosure in this way, you should act quickly as the redemption period (see below) is almost over. If all else fails, you can do a title search on your residence at the land title office. If the property is being foreclosed on, it will show up in the title search.

*Important Note: If you have moved into your home after the foreclosure action has already been started, the lender does not need to serve you for court orders to apply to you.

What should I do when I receive the petition?

First of all, read it. The petition says what the lender wants the court to do. Importantly, it contains a “redemption period.” This is how long your landlord has to pay what is owed to the lender before being forced to sell the property or transfer it to the lender. This is often six months, though it could be less.

Secondly, you should file an “Appearance”. An Appearance is a form that tells the other parties in the foreclosure proceedings that you would like copies of all subsequent court documents sent to you. This will let you follow what is happening in the foreclosure proceedings. Once you file your Appearance you will need to send a copy to the lender and any other parties who have already filed Appearances (the court file will contain this information).

This also lets the court know that you matter. Whatever the court decides to do, they can’t take you into account unless they know you are there. The more steps you take to assert yourself in a situation like this, the better.

You can get an Appearance at the court registry that is named at the top right corner of the Petition. It costs nothing to file an Appearance. You must file the Appearance within seven days of receiving the petition.

Should I keep paying rent?

Yes, you are still obliged to pay rent to your landlord under your tenancy agreement unless title to the property is transferred or a Receivership Order is issued (see below).

You may have trouble paying your rent during the foreclosure proceedings because your landlord or his agent have moved their office and not left a forwarding address or gone out of business. If this happens, don’t think that you automatically don’t have to pay rent anymore. Your landlord or the lender could come after you at a later date for rent you have not paid.

Save the money that you would have paid as rent, possibly in a separate bank account. You are technically liable for a period of six years, though in practice if no one has contacted you about this rent for eighteen months to two years it is unlikely they ever will. Use the money if you need to, but be aware that you might have to pay it later.

Do Court Orders from the proceedings apply to me?

As a tenant you are probably a respondent in the foreclosure action (see above) and foreclosure orders must be obeyed. If you have not been served and you lived at your residence before foreclosure proceedings started, then the orders do not apply to you.

This means that if the court orders that the property must be sold then you must comply with all of the terms set out that deal with how it will be sold. If a court orders that the property can be shown by a real estate agent during certain hours upon reasonable notice, you need to let the agent show the property during those hours. Pay attention to court orders, they affect you. You can minimize how stressful and disruptive the process is by staying informed and planning accordingly.

A court might issue a Receivership Order if the lender asks it to. This is an order that says that a tenant must pay their rent to a specially-appointed receiver instead of to the landlord. If this order is issued you must pay the receiver and not your landlord.

Will I have to move?

If an Order for Conduct of Sale is issued by a court, you will have to move out by the Possession Date that is stated in the order. A court could also issue an Order Absolute, which transfers title of the property to the lender. In this case you will have to move out on the date that the title is transferred. Plan ahead and don’t get caught by surprise by this. If you see this coming you should have plenty of time to find a new home without too much stress.

It is possible that the new owner or buyer of the property is willing to rent it to you. This requires a new tenancy agreement.