When a homeowner falls behind on mortgage payments in Ontario, the lender may have the right to sell the property through a power of sale. This legal process allows lenders to recover the debt owed without the lengthy and expensive steps involved in a foreclosure. While it can sound intimidating, understanding how the power of sale works—and what rights each party has—can make a difficult situation far less uncertain.
Understanding the Power of Sale
Under Ontario’s Mortgages Act, a power of sale gives mortgage lenders the ability to sell a property without first going through the courts, provided the borrower has defaulted on their mortgage obligations. The main goal is straightforward: allow the lender to recover the outstanding balance efficiently while ensuring the borrower’s rights are respected throughout the process.
When a borrower defaults, the lender begins by issuing a formal notice of default. This notice gives the borrower a brief window—typically 15 days for commercial properties and 35 days for residential—to bring the mortgage back into good standing. If the default isn’t corrected, the lender serves a Notice of Sale Under Mortgage, detailing the amount owed, the nature of the default, and the intention to sell the property if repayment isn’t made within an additional 35 days.
The Redemption Period: A Final Chance to Keep the Property
Once the Notice of Sale is issued, the borrower enters what’s called the redemption period—usually another 35 days—during which they can pay off the full arrears and any associated legal or administrative costs to stop the sale. This is an important safeguard for borrowers, as it provides a final opportunity to redeem the property before it changes hands.
If the default remains unresolved after this period, the lender is legally entitled to proceed with the sale. This is typically done through a real estate agent who lists the property for sale on the open market, ensuring the transaction is handled in a commercially reasonable way.
Obligations and Protections for Both Parties
While lenders have the right to sell under power of sale, they are also bound by important obligations. They must conduct the sale fairly and aim to achieve the best possible price for the property. This prevents a rushed or undervalued sale that could unfairly harm the borrower.
Borrowers, on the other hand, have several legal protections. The most notable is the Equity of Redemption, which allows them to reclaim ownership by paying off what’s owed at any point before the sale is completed. After the property sells, any surplus funds—after the lender’s costs and debt are covered—must be returned to the borrower.
For both borrowers and lenders, these protections create a balance between financial recovery and fair treatment. The process, while difficult, is designed to protect the integrity of Ontario’s real estate market and prevent unnecessary losses for either side.
Navigating the Process Confidently
The power of sale process can move quickly, and both lenders and borrowers benefit from having professional guidance. Understanding timelines, documentation, and your rights under Ontario law is critical to protecting your interests. If you’re facing a power of sale situation, reviewing the Ontario Mortgages Act or consulting a real estate lawyer early on can prevent costly missteps.
Partner with the Bernard Team
Real estate transactions under power of sale require a steady hand and deep market insight to help sellers, buyers, and investors make informed decisions in complex situations. Whether you’re managing a property under distress or exploring a power of sale opportunity, our team provides strategic advice backed by professionalism and discretion.
Connect with the Bernard Team today to discuss your real estate goals and get expert guidance every step of the way.
