• The power of sale process allows lenders to sell a property without going through the court system.
• If a borrower defaults on their mortgage payments, the lender can initiate the power of sale process to recover the outstanding debt.
• Borrowers have the right to redeem their mortgage up until the time of the sale, so seeking legal advice early on can be beneficial.

The power of sale process is a legal procedure that allows a lender to sell a property without having to go through the court system. In Ontario, the power of sale process is governed by the Mortgages Act and the Real Estate and Business Brokers Act.

Notice of Sale

When a borrower defaults on their mortgage payments, the lender may initiate the power of sale process to recover the outstanding debt. The process typically begins with the lender sending a Notice of Sale to the borrower, which outlines the details of the sale and gives the borrower a chance to pay off the mortgage arrears and any other outstanding costs.

Waiting Period

If the borrower is unable to pay off the arrears and costs, the lender can then proceed with the sale of the property. Here's a more detailed breakdown of the power of sale process in Ontario:

1. Notice of Sale: The lender must send a Notice of Sale to the borrower, which outlines the outstanding debt, the details of the sale, and the borrower's right to redeem the mortgage (i.e. pay off the outstanding debt) before the sale takes place. The notice must also be registered on the property's title and sent to any other parties with an interest in the property, such as other mortgage lenders or lien holders.
2. Waiting Period: After the Notice of Sale has been sent, there is typically a waiting period of at least 35 days before the lender can proceed with the sale of the property. During this time, the borrower has the right to redeem their mortgage by paying off the outstanding debt and costs.

Sale of the Property

If the borrower is unable to redeem their mortgage during the waiting period, the lender can then sell the property through a real estate agent or by public auction. The proceeds from the sale are used to pay off the outstanding debt, including the mortgage arrears, interest, and any other costs associated with the power of sale process. The lender must provide a statement of account to the borrower outlining the costs incurred during the power of sale process.

Surplus Funds

If the sale of the property generates more money than is required to pay off the outstanding debt and costs, the surplus funds are returned to the borrower. However, if there are other parties with an interest in the property, such as other mortgage lenders or lien holders, they may be entitled to a share of the surplus funds.

What Happens if the Property Does Not Sell for Enough to Cover the Mortgage and Costs?

If the sale of the property through power of sale does not generate enough money to cover the outstanding debt and costs, the lender may be able to pursue the borrower for the remaining balance. This is known as a deficiency judgment.

Court Order

However, in Ontario, the lender must obtain a court order to pursue a deficiency judgment. The court will then determine if the borrower is liable for the deficiency and the amount of the deficiency owed.

Right to Redeem Mortgage

It's also worth noting that in Ontario, borrowers have the right to redeem their mortgage up until the time of the sale. This means that if the borrower is able to pay off the outstanding debt and costs before the sale takes place, they can reclaim their property and avoid the power of sale process altogether.

Conclusion

In conclusion, the power of sale process in Ontario is a legal procedure that allows lenders to recover outstanding debt by selling a property without going through the court system. If the sale of the property does not generate enough money to cover the outstanding debt and costs, the lender may be able to pursue a deficiency judgment, but must first obtain a court order. If you're facing the power of sale process, it's important to seek legal advice to understand your