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REAL ESTATE There's certainly enough work to keep many lawyers busy. In Vancou- ver, Andrew Bury, a partner at Gowling Lafleur Henderson LLP, reports that mortgage defaults increased dramati- cally this year. Bud Steen, a senior civil litigator at Witten LLP in Edmonton, says his mort- gage enforcement practice is six-times busier this year than last. And, in Ontario, lawyers are preparing to deal with what Blake Cas- sels & Graydon LLP partner Silvana D'Alimonte calls "the ticking time bomb" of potential defaults. No one is saying that distressed property market requires the same kind of "street smarts" that Steen draws upon in the rough and tumble of the CFL. It also requires patience and empathy since the goal is always, where possible, to keep the ball in play — to mortgage defaults, which typically represent less than one per cent of all mort- gages, will generate enough legal work to pick up all the slack from a downturn in the real estate market. But it can make a difference for lawyers and firms that have expertise in this area. And it may provide opportunities to others who are now scrambling to acquire such exper- tise or to brush up on their knowledge of an area of law that they did not need in the boom years. So what are the key issues and chal- that were written in late 2006 and 2007, which when compared to the present-day value of the property seem very large." — ANDREW MACIAG BORDEN LADNER GERVAIS LLP help homeowners restructure their loans and make payments so lenders don't get caught in a situation where they have to take possession of a property no one wants to buy. In Alberta, as in British Columbia, lenges involved in this resurgent field of law? Here are some views from different parts of the country, reflecting the con- cerns of both commercial and residen- tial real estate lawyers. Imposing the penalty on homeowner loans When a Calgary Stampeder was ruled out of bounds in a crucial play in a re- cent Canadian Football League game, referee Bud Steen faced a torrent of verbal abuse, even though a video re- play proved him right. The incident provoked heated debate in the media and resulted in fines for two players and a coach. But for Steen, whose day job is as a lawyer specializing in mort- gage enforcement, it was just another day out of the office — another occa- sion that calls for calmness, fairness, and a thick skin. Acting as a lawyer for lenders in today's many homeowners and lenders alike were caught offside when the credit freeze brought an overheated hous- ing market to a sudden stop. As An- drew Bury of Gowlings explains it, people who run into trouble with their mortgages now find that "the two es- cape hatches previously available to them have been slammed shut." With property values down and credit tight, they may have a hard time selling their homes at a price that would let them pay off their mortgages and they also find it difficult, if not impossible, to find a lender who is prepared to ad- vance a second mortgage. But, he adds, lenders are confronted with the same market conditions as they try to realize the security on their mortgage loans. "If they end up with hundreds and hundreds of houses they can't move, they may be motivated to delay pro- ceedings a bit," he says. On the other hand, as Bury points out, in western provinces, unlike in On- tario, there is no provision for a speedy, private power of sale and foreclosure proceedings can drag on for up to two years, so lenders are reluctant to wait "We're seeing a lot of mortgages too long before going to court. A com- mon way of handling this dilemma, says Steen, is to launch formal proceedings while trying to get borrowers to agree to an accelerated repayment schedule or some other solution that will help them keep their homes. Andrew Maciag, a partner in the Calgary office of Borden Ladner Gervais LLP, says many of the mortgage defaults he encounters in his insol- vency practice are situa- tions where speculators, who have been furiously buying and selling in a booming market, sud- denly find themselves stuck with overvalued properties. "We're seeing a lot of mortgages that were written in late 2006 and 2007, which when com- pared to the present-day value of the property seem very large," he says. He notes that under Alberta property laws lenders cannot go after defaulting bor- rowers' other assets, such as property or funds not covered by the mortgage, except in certain circumstances, such as high-ratio mortgages or insured mort- gages. Some homeowners who get into desperate trouble with their mortgag- es may simply walk away from their homes, sometimes failing to inform the lenders that the house has been aban- doned. This can cause huge problems, particularly in winter months, for the lenders who may eventually find them- selves owning a property damaged by burst pipes and other consequences of neglect. Maciag says there are pro- visions under the law for accelerating foreclosure proceedings in cases of abandonment. Fast-tracked proceed- ings are also allowed to deal with the fraudulent sharp practices of so-called "dollar dealers." These are people who buy up rental properties for $1 from defaulting owners who have lost all their equity, then try to collect rents from tenants for as long as they can, sometimes also stripping buildings of fixtures, "picking the fruits of a dying tree," says Maciag. www. C ANADIAN Law ye rmag.com JANU AR Y 2009 21