Can I Challenge a Low Power of Sale Price in Ontario?

Seeing your home sell for less than you think it was worth is painful, especially when the sale leaves you owing money or leaves little surplus. Many owners ask whether the price can be challenged and whether the sale can be undone.

This article explains how a power of sale works in Ontario, what happens to the money, what protection the buyer has, and what kind of evidence is useful if you believe the price was too low. The answer depends heavily on the facts, so a lawyer should review your file.

How a power of sale works and where the money goes

If your mortgage contains a power of sale clause, the lender may sell the property once you have been in default for at least 15 days and at least 35 days' notice has been given to everyone with an interest in the property. If the mortgage has no power of sale clause, the statutory power of sale in Part II of the Mortgages Act applies, after three months of default and 45 days' notice to interested persons.

The notice of sale is given on Form 1, Notice of Sale under Mortgage, which is the prescribed form under O. Reg. 814/21.

Sale proceeds go first to the principal and interest owed to the lender, the expenses of the sale, and other encumbrances in order of priority. Any remaining surplus goes to the mortgagor. A low price therefore hurts you in two ways: it can reduce or eliminate any surplus, and it may leave a shortfall, depending on your mortgage and the facts.

What protection the buyer has

Many owners hope the sale can simply be reversed. That is difficult once a buyer has purchased. Under s. 36 of the Mortgages Act, where notice was given in professed compliance with the Part, the purchaser's title cannot be impeached for non-compliance with the Part's provisions.

The same provision says a person who was harmed has a remedy against the person who exercised the power of sale. In practical terms, a claim is often aimed at the lender or whoever conducted the sale rather than at the new owner.

Section 35 also matters. A document containing a statutory declaration by the mortgagee or its solicitor that the sale complies with Part III is conclusive evidence of compliance with that Part. This makes it hard to attack the paperwork itself, which is why the focus of a price complaint is usually on how the sale was conducted and what the lender is answerable for.

Evidence that helps if you think the price was too low

There is no single test you can apply on your own. Whether a lender met its obligations on price, and what remedies a court could order, depends on the facts and on provisions that a lawyer should confirm on the current statute. What you can do is preserve evidence early.

• Any appraisal of the property from before or around the time of default
• Recent comparable sales in your area
• The listing: how long the property was marketed, how it was advertised and at what asking price
• Offers received, including any that were rejected, and any sale to a related party
• The condition of the property and any repairs you had planned or completed
• All notices, letters and emails from the lender and its lawyer
• The final statement showing how the sale proceeds were applied

Ask for an accounting of the proceeds if you did not receive one. Because the proceeds are applied to the debt, sale expenses and other encumbrances in a set order, the statement shows whether a surplus should have come to you.

Notice, service and spousal issues

Sometimes the stronger issue is not price but process. The sale papers must include a solicitor's declaration naming everyone entitled to notice and stating they were served, along with declarations of service. A statement of spousal status is required for every person whose spouse was not served with notice.

Where notice was required but not given, a court order may be obtained dispensing with service. If you or a spouse never received a notice, tell your lawyer right away.

If the home was a matrimonial home, the Family Law Act also gives a spouse with a possession right the same redemption and relief rights, and the same notice of enforcement, as the other spouse.

Compare your options

What to do next

• Keep every document and do not discard emails or listing links
• Write down the dates you received each notice
• Request the lender's statement of how the sale proceeds were applied
• Get a retrospective appraisal opinion if a lawyer recommends it
• Speak to a real estate or litigation lawyer promptly, because delay can limit your options

A lawyer can confirm what duties applied to the lender on price, which court remedies are realistic and how costs may be affected.

Frequently asked questions