How to Stop a Power of Sale in Ontario Before the Sale Closes

If you have received a notice of sale under your mortgage, the timeline matters. The steps you can take are different before the sale closes than after it, and the right to reinstate described below generally ends once the power of sale closes.

This article explains the notice rules and the practical routes borrowers commonly consider: reinstating, refinancing, selling the home yourself and understanding the other protections the law gives borrowers. Which one fits depends on your facts, so speak with a lawyer quickly.

How the power of sale timeline works

Where a mortgage contains a power of sale, the lender cannot give notice of exercising it until the default has continued for at least 15 days, and cannot sell until at least 35 days after the notice is given. The 35-day notice must go to every person with an interest in the property.

The notice must be in Form 1, Notice of Sale under Mortgage, under O. Reg. 814/21. If the mortgage has no power of sale clause, the statutory power applies only after three months' default and requires 45 days' notice.

Once a notice has been given, the lender generally cannot start any further proceeding to enforce the mortgage until the time in the notice has passed, unless a Superior Court judge permits it.

Option 1: Reinstate by paying what is due

Despite any agreement to the contrary, a borrower in default can stop the lender from enforcing the acceleration clause by paying the amount due under the mortgage and the lender's necessary expenses. That means the arrears, not money that is only due later.

You can give the lender written notice requiring a written statement of the arrears and expenses. The lender must answer within 15 days, and if it fails to do so without reasonable excuse, or gives an incomplete or incorrect answer, its enforcement rights are suspended until it complies. Ask for this statement early so you know the real figure.

This route is only open before the sale closes. Once the power of sale closes, section 22 no longer applies and the borrower is limited to a claim for damages against the lender.

Option 2: Refinance or sell the home yourself

• Refinance: A new lender may allow borrowing up to 80% of the home's value, minus what you still owe. Private mortgages are generally short-term, often interest-only, and fees are often higher than for a traditional mortgage, so have an exit strategy.
• Sell it yourself: A sale-by-borrower plan lets the owner sell at fair market value and can usually stay up to 90 days, although this is a relief option a lender may offer.
• Negotiate: Other relief a lender may offer includes capitalizing missed payments or interest-only payments for a limited time.

Federally regulated lenders are expected to give tailored relief to borrowers at risk of default on their principal residence, with the borrower's express consent. That does not extend to provincially regulated and private lenders.

Option 3: Other protections to know about

A lender selling under power of sale must take reasonable precautions to obtain the true market value of the property as of the date of sale. A hasty or secretive sale can cast doubt on whether a proper price was obtained. A lawyer can tell you whether a court application is realistic in your situation.

If a spouse has no ownership interest in the matrimonial home but has a right of possession, that spouse has the same right of redemption or relief against forfeiture as the owner-spouse and is entitled to the same notice.

After a sale closes, a purchaser's title cannot generally be attacked because of a defect in the process where notice was given in professed compliance with the Mortgages Act, and anyone harmed has a remedy against the lender. That protection does not extend to a purchaser who had actual notice of the defects.

Also, interest on mortgage arrears cannot be charged at a rate higher than the rate on principal not in arrears.

What to do next

• Note the date on the notice of sale and count the days to the earliest sale date.
• Request a written statement of arrears and expenses from the lender.
• Contact your lender about relief while you arrange funds.
• Price a refinance and a sale side by side.
• Speak with a lawyer soon, ideally before the sale closes, because the right to reinstate ends once it does.

Frequently asked questions