Power of Sale in Ontario: What Homeowners Need to Know

What Is Power of Sale?

Power of sale is the most common remedy used by mortgage lenders in Ontario when a borrower defaults on their mortgage. Unlike foreclosure (rarely used in Ontario), power of sale does not transfer ownership to the lender. Instead, the lender sells the property to recover the outstanding mortgage balance — and any surplus proceeds after paying off the mortgage and costs go back to the borrower.

When Can a Lender Exercise Power of Sale?

Under Ontario's Mortgages Act, the lender must give the borrower a Notice of Sale under Section 22. After receiving this notice, the borrower has 35 days to pay the arrears and costs to stop the process.

The Process

1. Missed payments and demand letter from lender
2. Notice of Sale under Section 22 of the Mortgages Act
3. 35-day redemption period
4. If not redeemed, lender lists and sells the property
5. Proceeds pay mortgage balance, arrears, and lender's costs
6. Any surplus is returned to the borrower

Homeowner Rights

Homeowners retain the right to redeem the mortgage at any time before the sale is completed. The lender must sell the property at fair market value. If the lender fails to obtain market value, the homeowner may have a claim against the lender.

How to Stop a Power of Sale

• Pay the arrears within the redemption period
• Refinance: Obtain new financing to pay out the defaulted mortgage
• Sell the property yourself before the lender completes their sale
• Negotiate with the lender — many lenders will consider a repayment arrangement
• Seek legal assistance — a lawyer can review whether proper procedures were followed