Foreclosure is what happens when the bank or another lender wants to take back the house or apartment you rent because your landlord cannot pay the 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 to the lender out of the proceeds from the sale. Foreclosure can be a complicated and stressful experience for a tenant because the contract the bank has with the landlord takes precedence over the contract (tenancy agreement) the tenant has with the landlord.
The lender starts a court action by filing a Petition for foreclosure against your landlord. The Petition is a document that sets out what the lender wants the court to do. The tenant will often be named as a Respondent to the Petition and may be served with the Petition in person. If the server cannot find the tenant it is possible for the server to mail a copy of the petition and/or leave it with another adult at the residence.
It is possible that the tenant will not be named as a Respondent in the Petition. If this is the case, a server will likely try to serve the landlord by bringing the Petition to the tenant’s residence. The server may serve the landlord with the Petition by giving it to the tenant, since the tenant would most likely be an adult at the resident that is being foreclosed on. If this happens, the tenant should give their landlord the documents immediately.
A tenant may find out that their rental home is being foreclosed when an appraiser comes by the residence to appraise the property in preparation of a sale. If a tenant learns of the foreclosure in this manner, they should act quickly as the redemption period is almost over (see section “What Should I do When I Receive the Petition for Foreclosure?” below).
If you are unable to get information about the legal action that is happening regarding your rental home, you can do a land title search (see our page Finding Out Who My Landlord Is for more information. The land title search will disclose any foreclosure actions being sought in court. There is a fee for completing a land title search.
Note: If you have moved into your home after the foreclosure action was started, the lender does not need to serve you with court papers.
First of all, carefully review 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, although it could be less. Secondly, file a Response to a Petition (Form 67) at the Supreme Court registry where the Petition was filed. A copy of this form can be obtained on the Ministry of Justice website. By filing a Response to a Petition form, a tenant can inform the other parties in the foreclosure proceedings that they would like copies of all the subsequent court documents. This will let them follow what is happening in the foreclosure proceedings. Once a Response to a Petition is filed, the tenant will need to deliver copies to the lender and all other named respondents within 21 days after the date the Petition was served/delivered on the tenant.
Yes, tenants are still obligated to pay rent according to their tenancy agreement, unless title to the property is transferred or an Order Nisi is granted directing you to pay elsewhere (see below).
A tenant may have trouble paying rent during the foreclosure proceedings because their landlord/agent may have gone out of business or moved their office without leaving a forwarding address. If this happens, do not think that you no longer have to pay rent. Your landlord or lender could come after you at a later date for the rent you have not paid, so it is a good idea to save the money that you would have paid as rent. You are legally liable (responsible) for a period of six years, although in practice if no one has contacted you about this rent for 18 to 24 months it is unlikely they ever will. Use the money if you need to but be aware you might have to pay it back later.
An Order Nisi may direct a tenant to pay their rent to a specially-appointed receiver instead of the landlord. If this order is issued you must pay the rent as the order directs and not to your landlord.
Yes, pay attention to court orders, they do affect you. This means that if the court orders that the property be sold then you must comply with all of the terms set out that deal. If a court orders that the property 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. You can minimize how stressful and disruptive the process is by staying informed and planning accordingly.
If an Order for Conduct of Sale is issued by a court, you will have to move out by the Possession Date stated in the order. A court could also issue an Order Absolute, which transfers title of the property to the lender. If an Order Absolute is made you will have to move out on the date that the title is transferred, unless the new owner of your rental home is willing to rent to you. This will require a new tenancy agreement.