Applying to Court to Delay a Power of Sale in Ontario

If your lender has started a power of sale, the clock feels very short. You may have missed payments, tried to refinance, and run out of easy options. Asking a judge for more time is a real option, but it is not automatic, and it works best when you understand the steps the lender must follow.

This article explains, in general terms, the Ontario rules on notice, how a default can be cured, and the court powers a borrower relies on. Every situation is different, so treat this as a map, not a prediction.

What a lender must do before selling

A mortgagee cannot give a notice of exercising a power of sale until the default has continued for at least 15 days, and the sale cannot be made until at least 35 days after the notice is given. Those are minimums, so your lender's own timeline may be longer.

The notice must also reach the right people. The lender may not exercise a power of sale unless the notice has been given to the listed persons, including persons shown on the parcel register and the index of executions, a Crown or public authority claiming a statutory lien where the lender has written notice of it, and anyone who gave the lender written notice of an interest beforehand.

The notice must be given by personal service or by registered mail, addressed to the person's usual or last known address or an address set out in the mortgage. A registered-mail notice must be mailed in Ontario and is deemed given on the day it is mailed.

Curing the default without a judge

Before going to court, check whether you can simply fix the problem. Despite any agreement to the contrary, a defaulting mortgagor whose whole debt has been accelerated can be relieved of the default by performing the broken covenant or paying the arrears plus the lender's necessary expenses. This can be done at any time before a sale under the mortgage, or before an enforcement action is started.

You can also give the lender written notice requiring a written statement of the arrears or the nature of the default, and of the expenses the lender has necessarily incurred. Having the lender's figures in writing helps you see what it says you owe, and a lawyer can help you check them.

If the lender has already started an enforcement action, you may pay $100 into court as security for costs and then perform the covenant or pay the money due. The court must then dismiss the action if judgment has not yet been recovered, or may stay it at later stages.

What a judge can do

The Courts of Justice Act lets a court grant relief against penalties and forfeitures on terms it considers just. The Superior Court of Justice may also grant an interlocutory injunction or mandatory order, or appoint a receiver. These are the general powers a borrower relies on when asking a judge to restrain or delay a power of sale.

How a judge will view your request depends on the facts of your situation, so it is worth confirming with a lawyer how this applies to you.

Once a lender has given a demand or notice of sale, it generally may not start further proceedings or actions to enforce the mortgage during the time set in the notice without an order from a judge of the Superior Court of Justice. The judge may make that order without notice or on whatever notice the judge directs. The bar does not apply to proceedings to stop waste or other injury to the mortgaged property.

Problems with the notice, and special cases

• Mortgages with no power of sale clause: the statutory power to sell arises only after three months' default, and no sale may be made until 45 days' written notice has been given, which may be given at any time after 15 days' default.
• Mortgages with their own power of sale, or that declare Part II does not apply: the statutory power in Part II does not apply to them.
• Timing after a sale: where a notice was given in professed compliance with Part III, the purchaser's title cannot be impeached because Part III was not followed. A person harmed keeps a remedy, such as damages, against the person who exercised the power of sale.
• Registered statements: a registered document containing the prescribed statements about the default, service and compliance is conclusive evidence of compliance in favour of the purchaser.

The practical point is that a notice problem is much easier to raise before a sale closes than after. Once a sale is completed to a purchaser, your remedy is usually against the lender rather than the title.

If a sale goes ahead under the statutory power in Part II, the proceeds are applied to sale expenses, then interest and costs due under the mortgage, then principal, then subsequent encumbrancers by priority, then tenants' rent deposits under section 106 of the Residential Tenancies Act, 2006 that were not applied to the last rent period, with the residue going to the mortgagor. Many home mortgages rely on contractual terms instead, so how any surplus is handled depends on your charge terms and is worth confirming with a lawyer.

What to do next

• Find your notice and note the date it was mailed or served, and who it was addressed to.
• Ask the lender in writing for a statement of the arrears and expenses.
• Work out whether you can pay the arrears and expenses, or arrange refinancing, before any sale date.
• Gather your mortgage, any renewal documents, and your payment records.
• Speak to a lawyer promptly, since the notice period is short and court time takes planning.

If you think the lender's costs are too high, any interested person may have them assessed by an assessment officer without a court order.

Frequently asked questions