Enforcing Judgments Against Land
| This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Alison Ward in August 2018. |
An unsecured creditor who obtains a court judgment against a debtor can bring an enforcement action against land owned by the debtor.
Client problems
- Creditor has threatened to take a client’s house, or to foreclose or repossess the house.
- Client brings court documents showing the creditor has started a foreclosure action or an action to have the client’s house sold under the Court Order Enforcement Act.
Summary of the law
Foreclosures and enforcement actions are the two main legal proceedings that creditors may bring against a home that a debtor owns. It is important to understand the differences between the proceedings.
Foreclosure
Foreclosure is a proceeding brought by a creditor who has a mortgage against property. Usually, a person who borrows money to buy a house has to give a mortgage over the house as security for the creditor. If the borrower defaults, the creditor can bring a legal action to take the property and, at the same time, get a judgment for the money owed.
Enforcement action against land
An enforcement action against land is a proceeding brought by an unsecured creditor who has obtained a judgment against a debtor. Unsecured creditors do not have mortgages as security. The creditor must first get a judgment, and then bring the enforcement action.
Under the Court Order Enforcement Exemption Regulation, a judgment debtor whose principal residence is located within the Metro Vancouver or Victoria areas may claim $12,000 equity that is exempt from seizure. Judgment debtors living outside these areas may claim an exemption of $9,000 equity in their principal residences.
Procedure
Enforcement actions for the sale of land must be brought in Supreme Court under sections 92 to 113 of the Court Order Enforcement Act. These sections provide a code for the procedure for having the property sold. The judgment creditor’s first step is to register the judgment against the debtor’s property in the Land Title Office.
If the judgment that the creditor is seeking to enforce by the sale of land was obtained in Small Claims Court, the creditor must begin a Supreme Court action under the Court Order Enforcement Act to force the sale of the property.
If the judgment that the creditor is trying to enforce by the sale of land was obtained in Supreme Court, the creditor need only file a Notice of Application in the Supreme Court action between the creditor and debtor.
At the first hearing (called a “show cause” hearing), the debtor must show why the property should not be sold to satisfy the judgment. It is difficult, though not impossible, for debtors to convince the judge to dismiss the creditor’s action. Under s. 96(2) of the Court Order Enforcement Act, if the home of the judgment debtor is on the land, the court may defer the sale depending on how the judgment debtor responds to the terms and conditions, usually instalment payments), set by the court.
Most often, the judge makes an order for the next hearing in the process. This is a hearing before a registrar held in a more informal setting. The registrar hears evidence on matters such as the value of the property, what creditors have claims (and for how much) against the property, and the debtor’s financial circumstances.
The registrar writes a brief report, files it in the court file, and sends a copy to both the creditor and the debtor. Then the creditor has to file an application for the final court hearing before a judge. At that final hearing, the judge reviews the registrar’s report and decides whether to make an order to have the property sold. If the order is made, the creditor can proceed with the sale by forwarding a copy of the sale order to the local court bailiff. The court bailiff usually arranges for a real estate agent to sell the property.
If the debtor’s interest in the land is a joint tenancy or tenancy in common, rather than the entire title, a creditor can still take enforcement action. Essentially, the process is the same, except that if one of the co-owners of the property is not a judgment debtor, then only the interest of the judgment debtor is subject to sale. The buyer/new owner may be the judgment creditor, the non-creditor owner, or a third party. If the new co-owners are not compatible, either one of them may apply for a sale of the entire ownership of the property under the Partition of Property Act.
Information gathering
Confirm which parties the creditor is making a claim against. For example, is the claim against one of two spouses? both spouses? guarantors?
Confirm whether any legal action against the debtor has begun. If a legal action has been started, confirm the nature of the proceedings and the stage the proceedings are at.
Obtain all the facts on the history of the dealings between the debtor and the creditor.
Obtain all the facts on the debtor’s financial circumstances, including income and expenses, assets and debts, and future financial prospects.
If the creditor holds a mortgage and has started a foreclosure, the debtor will be served with a foreclosure petition. If the creditor does not have a mortgage, then a Small Claims Court or Supreme Court action for a judgment must be started first. The proceeding for enforcement against the land is taken after judgment.
Confirm with the debtor what legal documents have been served. If necessary, conduct a search at the court registry for legal documents.
Consider conducting a Land Title Office search of the debtor’s property to confirm all the charges against the title.
The most significant issue in an enforcement action against land is the equity the debtor has in the land. For this reason, you must obtain a realistic appraisal of the property. The most recent statement from the BC Assessment Authority can help. Alternatively, you could use a real estate agent or qualified appraiser.
Enforcement actions against land are relatively rare because often there is little equity in the land for either the debtor or the creditor. Small amounts of equity ($12,000 in the Metro Vancouver and Victoria areas, and $9,000 elsewhere in the province) are exempt from execution under the Court Order Enforcement Exemption Regulation.
Often, other creditors’ rights may have priority over an unsecured creditor with a judgment registered against the land. In general, if these creditors’ claims were registered against the title to the land before the unsecured creditor’s judgment was registered, the holders of these claims are entitled to be paid in full out of any enforcement action sale before any money is paid to the judgment creditor.
Many different types of creditors can have priority, including:
- creditors holding mortgages
- government authorities with claims for taxes (for example, a municipality owed property taxes or the federal government owed income taxes)
Also, the costs of the sale (including lawyers’ fees, court bailiff sale fees, and any real estate agent fees) have to be paid before the judgment creditor is paid.
If there are other judgment creditors on title, a judgment creditor may get little out of an enforcement proceeding. By law, if one judgment creditor brings an enforcement action, all the judgment creditors who have registered their judgments against the land get a share of the sale proceeds based on the size of their claim. There is no priority of time among judgment holders, as there is with most other creditors. This means that if a creditor with a relatively large judgment registered against the land after a creditor with a small judgment, the former still gets a proportionally larger share of the sale proceeds available after the priority creditors (those who are judged to be entitled to be paid first) are paid in full.
Solving the problem
Review all of the debtor’s financial circumstances. If there are other creditors, consider a remedy (see the section on Debtor’s Options for Getting Out of Debt) that includes all creditors.
Consider whether it is feasible for the debtor to sell the property and pay off all creditors.
If there is only one significant creditor, consider negotiating a financial solution that works for the debtor’s circumstances. This might include:
- making a settlement
- temporarily lowering instalment payments
- temporarily suspending payments
- granting additional security to the creditor
If no financial solution is possible because the debtor has no foreseeable ability to pay on the judgment, it may still be possible to convince the creditor to suspend the enforcement action if you can show the creditor that there will be little equity available for the judgment.
As a final alternative, the debtor can defend against the enforcement action. This might be possible if:
- there appears to be some equity in the property for the judgment creditor, and
- the debtor has no foreseeable ability to pay on the judgment.
Based on the case law, there are a number of possible outcomes. In extreme circumstances, the court might be persuaded to dismiss the action at the show cause stage if a sale would produce extreme hardship for one or more of the judgment debtors.
The court might be persuaded to order a deferral of the sale at the final hearing when the registrar’s report is considered. Section 96 of the Court Order Enforcement Act provides in part: “where a premises situated on the land … of a judgment debtor is the home of the debtor, the court may defer the sale, subject to the performance by the judgment debtor of terms and conditions of payment or otherwise as the court imposes.”
The court might be persuaded to defer the order for sale to allow the debtor to try to sell the property. The advantage of this approach is that the debtor may be able to get a better price for the property than if the property is sold by the court bailiff.
Related topics and materials
See the other sections on enforcing court judgments:
See related topics:
- Bailiffs, Court Bailiffs and Sheriffs
- Court Process in Consumer and Debt Matters
- Mortgages and Foreclosure
- Instalment Payment Orders
- Lawyers’ Fees
See also Dealing with Debt: A Consumer’s Guide from the Office of the Superintendent of Bankruptcy Canada.
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