What is the difference between power of sale and foreclosure in Ontario?
In Ontario, lenders who hold a mortgage on residential property most commonly use the power of sale process when a borrower defaults. A small number use foreclosure, but it is far less common today.
Power of sale is a contractual remedy given to the lender under the mortgage agreement and the Mortgages Act. After a period of default and proper notice to the borrower (at minimum 35 days for residential property), the lender can sell the property without a court order. The lender must sell at market value and, after repaying the mortgage debt, costs, and expenses, must pay any surplus to the borrower. If the sale proceeds are insufficient to cover the debt, the lender may sue the borrower for the deficiency (shortfall).
Foreclosure, by contrast, is a court process through which the lender extinguishes the borrower's right to redeem (reclaim) the property and takes title outright. Because foreclosure gives the lender title but cuts off the deficiency claim, and because it requires a court application, it is rarely used in practice in Ontario.
Both processes include a right of redemption — the borrower can pay out the full mortgage debt (plus costs) to stop the process and reclaim the property, right up until the moment of sale or, in foreclosure, until the court order vests title.
Key takeaways
- Power of sale is the most common lender remedy in Ontario and does not require a court order.
- The lender must give at least 35 days' notice before exercising power of sale on residential property.
- Foreclosure extinguishes the deficiency claim but is rare and requires a court process.
- Borrowers retain a right of redemption until the sale is completed or foreclosure is finalized.