Can my lender sue me for the shortfall after a power of sale in Ontario?
Yes. If a power of sale nets less than what you owe — the outstanding mortgage balance plus the lender's costs of enforcement — the lender can sue you personally for the difference, called a deficiency claim. Power of sale only disposes of the property; it does not release you from the underlying debt.
The lender must account for the sale: proceeds first cover the mortgage debt, then reasonable costs such as legal fees, real estate commission, and any repairs needed to sell. Anything left over belongs to you; any shortfall becomes a claim the lender can pursue like any other debt. The lender generally has two years from the sale to start that lawsuit, under the Limitations Act, 2002.
Before suing, many lenders will negotiate — a payment plan, a partial settlement, or simply writing off a small shortfall rather than paying to litigate it. If you are facing a genuine deficiency claim, or think one is coming, your options include negotiating directly, disputing the amount claimed (was the sale price reasonable, were the costs justified), or addressing it through a consumer proposal.
Get legal advice as soon as you receive a power of sale notice — protecting your position on a possible deficiency starts well before the sale closes.
Key takeaways
- A power of sale does not release you from the debt — a shortfall becomes a personal deficiency claim.
- The lender must credit sale proceeds against the debt first, then costs, before any shortfall is calculated.
- Lenders generally have two years from the sale to sue for a deficiency.
- You can dispute the sale price or costs claimed, negotiate directly, or address it through a consumer proposal.