Understanding the Power of Sale Process in Ontario

Understanding the Power of Sale Process in Ontario

What You Need to Know Before It’s Too Late

⚠️ Important Note: This article is for informational purposes only. It is not legal or financial advice. Always consult a real estate lawyer, licensed mortgage professional, or consolidation expert before making any decisions. As real estate professionals, we can help connect you with the right experts.

In Ontario, the Power of Sale is the most common legal remedy used by mortgage lenders when a borrower defaults on their mortgage agreement. It allows the lender to take steps to sell the property and recover their money — including principal, interest, and legal costs.

While the process is legal and enforceable, it’s not quick, and it’s not pretty. It can be extremely stressful for homeowners and should be viewed as a last resort. If you’re facing this situation or working with someone who is, it’s crucial to understand the process — and your rights — and to act early.

⚠️ Important Note: This article is for informational purposes only. It is not legal or financial advice. Always consult a real estate lawyer, licensed mortgage professional, or consolidation expert before making any decisions. As real estate professionals, we can help connect you with the right experts.

The Power of Sale Timeline in Ontario

Step 1: The Borrower Defaults on the Mortgage

The process begins when the borrower fails to uphold the terms of the mortgage — most commonly, missed payments. But it can also be triggered by:

  • Failing to pay property taxes

  • Letting home insurance lapse

  • Damaging the property

  • Using the property for illegal purposes

If the default is anything other than missed payments, the lender is required to send a written notice and give the borrower a chance to correct the issue. Still, even one missed payment can legally start the clock on the Power of Sale process.

Step 2: The Lender Issues a Notice of Sale

At least 15 days after the borrower has defaulted, the lender can serve a Notice of Sale Under Mortgage. Other notices may also be required under the Bankruptcy and Insolvency Act or Farm Debt Mediation Act, depending on the circumstances.

This notice must be sent by prepaid registered mail to:

  • The borrower (mortgagor)

  • Any guarantors

  • Anyone with a registered interest in the property (e.g. other mortgagees, lien holders, judgment creditors)

Once sent, the lender must wait a minimum of 35 days (or 40 days if a married couple occupies the home) before taking the next step.

⚠️ Important Note: This article is for informational purposes only. It is not legal or financial advice. Always consult a real estate lawyer, licensed mortgage professional, or consolidation expert before making any decisions. As real estate professionals, we can help connect you with the right experts.

Step 3: The Redemption Period — A Last Chance to Catch Up

This waiting period is known as the redemption period. During this time, the borrower can still:

  • Bring the mortgage into good standing (if it’s not fully due), or

  • Pay off the entire amount owing, including legal and administrative fees

If that doesn’t happen, the lender can move forward legally to regain control of the property.

Step 4: Legal Action — Statement of Claim and Possession

Once the redemption period ends, the lender can issue a Statement of Claim to pursue:

  • Recovery of the mortgage debt

  • Legal possession of the home

If the borrower doesn’t file a defence, the lender can seek a default judgment, and from there, apply for a Writ of Possession from the court. Once granted, the Writ is handed over to the local Sheriff’s office, which will schedule the eviction of the homeowner and any other occupants.

If the occupants do not leave voluntarily, the Sheriff will enforce the eviction order.

Step 5: The Property is Listed and Sold

Once the lender regains possession, they typically hire a licensed real estate agent to list and sell the property on MLS. The sale must reflect fair market value, so most lenders obtain two independent appraisals to protect themselves from liability.

Power of Sale properties are typically sold “as is, where is,” with special clauses included in the offer to reflect that.

⚠️ Important Note: This article is for informational purposes only. It is not legal or financial advice. Always consult a real estate lawyer, licensed mortgage professional, or consolidation expert before making any decisions. As real estate professionals, we can help connect you with the right experts.

Step 6: What Happens to the Sale Proceeds?

This is where it gets real. The proceeds from the sale are used to pay off debts in a legally defined order:

  1. All selling-related costs (realtor commissions, legal fees, Sheriff fees, etc.)

  2. Outstanding mortgage principal, interest, and penalties owed to the primary lender

  3. Other registered debts — like second mortgages, liens, and judgment creditors, in order of registration

  4. Surplus funds, if any, are legally required to be returned to the former homeowner

⚠️ Here’s the truth: In most cases, there is no surplus left over. Between mounting legal costs, penalty interest, arrears, and home devaluation, the sale often doesn’t fully cover what’s owed. In fact, if there’s still a shortfall, the lender may pursue the borrower for the remaining balance — including through a Writ of Execution registered against the borrower.

Bottom Line: Don’t Wait for the Knock at the Door

A Power of Sale is not just a legal formality — it’s a major financial and emotional event that can have lasting consequences. If you’re behind on your mortgage payments, struggling with debt, or overwhelmed by life changes, don’t bury your head in the sand. There are options — but timing matters.

At the Shannon Murree Group | Real Estate With Impact – RE/MAX Hallmark Chay, we are not lawyers or mortgage brokers, but we are connected to a trusted network of professionals who can help you explore:

  • Mortgage restructuring or refinancing

  • Debt consolidation or credit counselling

  • Consumer Proposal or Bankruptcy

  • Selling privately before Power of Sale begins

  • Legal options for homeowners in distress

You are not alone. Let’s talk — confidentially, compassionately, and without judgment. Connect with us for a free consult today

⚠️ Important Note: This article is for informational purposes only. It is not legal or financial advice. Always consult a real estate lawyer, licensed mortgage professional, or consolidation expert before making any decisions. As real estate professionals, we can help connect you with the right experts.

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