Wanting to take advantage of remote working, Jocelyne and Denis bought a pretty country house in the Lanaudière region in 2021.
The couple found their little corner of paradise, leaving the city and its constraints behind. “We fell in love with this property. The municipal assessment was $165,000, we bought it for $275,000 and took out a mortgage loan of $250,000,” explains Jocelyne.
But in early 2024, Denis’ employer told him he would have to return to working in the office four days a week. For a few months, he transported to downtown Montreal, but last July he finally resigned. “I was almost sure I could find a job with equivalent salary conditions in the region, or $95,000 per year,” he says.
Nothing goes as planned
Unfortunately, her wish did not come true and since then, the couple can only count on Jocelyne’s salary. Over time, the balance on their credit cards ballooned to $15,000.
Another unpleasant surprise: while they were carrying out renovations in the basement, they found water infiltration and mold. An expert estimated the necessary work at $30,000 and since they had acquired the property without legal guarantee, they were not able to turn against the seller and sue him for a hidden defect.
The couple decided to sell their property and move to cheaper accommodation. However, because of the costs of the work and the large amount still to be paid on their mortgage, they were unable to find a buyer for a price that would allow them to repay everything.
Their broker also confirmed to them that given the condition of the house and the sluggish real estate market in their area, the sale price would probably not exceed $225,000, a shortfall of $36,000.
The bank says no
Not knowing what to do, they contacted their financial institution to repossess the house. “But the bank refused. You should know that she is never obliged to take back a building, even when its value greatly exceeds the amount of the mortgage,” explains Pierre Fortin, president of Jean Fortin et Associés. “In fact, a bank will only repossess a property if the customer stops paying their mortgage and they have no other choice,” he continues.
-When it regains possession of the building due to non-payment, the financial institution then has two choices. “It can carry out a sale under judicial supervision: the owner is responsible for the loss if there is one, but pockets the profit otherwise,” explains Pierre Fortin.
Another possibility: recovery of payment. The owner is not responsible for the loss, but is not entitled to the profit, if any.
Proposal with delivery to the creditor
Given their debt and the impasse they found themselves in, Jocelyne and Denis consulted a trustee and made a consumer proposal. This includes their credit card balance as well as the loss on their house estimated at $36,000, for a total of $51,000. The proposal submitted amounts to $18,000 and is payable in 60 installments of $300 per month. “As part of this proposal, it is also expected that the couple will hand over the property to the secured creditor. Thanks to this agreement, they were able to settle their debts, hand over the house to their creditor and put an end to this enormous stress,” mentions Pierre Fortin.
To avoid reaching this point, any real estate purchase should be preceded by an inspection by a professional and should preserve legal recourse in the event of hidden defects. “The pandemic has created a real estate market where buyers have been at a significant disadvantage. The purchasing conditions have since been readjusted, but for the transactions that took place at that time, the effects are likely to be felt for a long time to come,” concludes Pierre Fortin.
To learn more:
Credit and debt – Mortgages
educaloi.qc.ca/capsules/les-hypotheques
