Mortgage foreclosures can become complex – especially when it comes to determining who is responsible for the various costs involved. Whether you are a lender seeking to recover your expenses, or a homeowner trying to pay off your debts, it is crucial to know what costs can be added to a mortgage – and which cannot.
In Saskatchewan, legislation and previous caselaw outline several recoverable and non-recoverable expenses that a lender can claim during a foreclosure. Below, each of these potential expenses will be discussed.
Legal Fees
Lenders are generally entitled to recover legal fees in a foreclosure. In Saskatchewan, the courts have taken the approach of setting a benchmark amount of $5,500 as the standard amount for legal fees in a routine foreclosure. While this amount serves as a general guide, courts have occasionally adjusted it depending on the circumstances.
Depending on the duration or complexity of the foreclosure proceedings, Saskatchewan courts have altered the allowable amounts of legal fee recovery. Further, as inflation rises, the courts have incrementally increased the benchmark amount for legal fees for routine foreclosures.
Property Management Fees, Property Taxes, and Condominium Fees
When a lender is forced to repossess an abandoned property, they may be entitled to recover reasonable costs for maintaining it before it can be resold. This is because while foreclosure proceedings are unfolding, there are often expenses that continue despite the fact the borrower is no longer able to pay them. To preserve the value of the home during this time, the lender typically steps in and starts paying for property taxes, condominium fees, and the maintenance of the home.
Saskatchewan case law and legislation have allowed lenders to recover these costs. However, there is no open tab on what amount is recoverable to keep the home in good standing, and courts will use their discretion in determining what a lender should be entitled to.
Inspection Fees
Inspection fees refer to the costs incurred by lenders to check in on a property that is the subject of a foreclosure, and these fees are often one of the most controversial areas when it comes to what is and what is not recoverable by lenders.
Normally, inspection fees are not recoverable. Where things get controversial however is differentiating what expenses are allowed through property management fees (which are recoverable), and what expenses are not when they are classified as inspection fees. To make matters more challenging, Saskatchewan legislation has laid out an exception for lenders to recover costs related to one initial inspection of a property during a foreclosure.
Collection Costs, Late Payment Charges, Taxes, and Insurance Premiums
Saskatchewan legislation has clearly made costs associated with the collection of outstanding mortgage debts, additional charges for late payments, taxes (other than property taxes), and insurance premiums not recoverable for lenders.
Costs can be Reduced, or Denied by the Court
Lastly, it is crucial to know that any of the above-mentioned costs a lender can be entitled to are subject to potential denial or reduction. In certain instances, the courts in Saskatchewan have denied or reduced what a lender can recover when the lender or their lawyer has not acted promptly enough, or when they have attempted to claim ineligible costs. This shows it is crucial to be informed of best practices when navigating any mortgage foreclosure to ensure both a lender is being compensated fairly, and a borrower is not overpaying.
Navigating Foreclosure with Confidence
Every foreclosure is different, and cost recovery can become heavily nuanced. Whether you are a lender seeking full recovery for the costs you have incurred or a homeowner facing financial pressure, the details matter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
