How to Stop Power of Sale in Ontario: Options Before the Sale Date

If you have received a notice of sale, the clock is running, but you may still have options. The earlier you act, the more of them are usually available.

This article covers the common legal ways to stop or stop the progress of a power of sale in Ontario. Each situation is different, so use it as a starting point and speak with a lawyer.

Know your timeline first

With a power of sale clause, the lender cannot sell until at least 35 days after the notice of sale is given. Once notice has been given, the lender also cannot start further enforcement proceedings until the time in the notice has passed, unless a Superior Court judge permits it.

Find the date on your notice and work backward. Everything below needs to happen before the sale closes.

Pay the arrears and expenses

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.

To find out the figure, give the lender written notice requiring a written statement of the arrears and expenses. The lender must answer within 15 days. If it fails to do so without reasonable excuse, or gives an incomplete or incorrect answer, its enforcement rights are suspended until it complies.

Check the amounts. No fine, penalty or interest rate may be charged on arrears that increases the charge beyond the rate payable on principal not in arrears.

Negotiate with the lender

Lenders often prefer a workable plan to a sale. Options a lender may offer include blend-and-extend, capitalizing missed payments, interest-only payments for a limited time, and a sale-by-borrower plan where the owner sells at fair market value and can usually stay up to 90 days.

A payment deferral is an agreement with the lender, not a right. It usually lasts up to 4 months, interest keeps accruing, and you will owe more afterwards.

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. Those expectations apply to banks and other federally regulated lenders, not to provincially regulated or private lenders.

Refinance or sell the home

Refinancing to clear the arrears is possible only if a new lender will approve you. Home equity borrowing usually goes up to 80% of your home's value, minus what you still owe. Private mortgages are generally short term, often come with higher fees, and may carry fees for late payments. Have an exit strategy and consider independent legal advice before signing.

Selling it yourself can give you more control than a forced sale. If you break the mortgage contract, the prepayment penalty is usually the higher of 3 months' interest on what you still owe or the interest rate differential.

Be aware that a lender selling under power of sale must take reasonable precautions to obtain true market value. A hasty or secretive sale can cast doubt on the price.

Court steps and what to do next

Whether a court application makes sense depends on the facts, such as problems with the notice, the amounts claimed or the way the sale is run. A lawyer can tell you whether one is available. Once the power of sale has closed, section 22 no longer applies and you are limited to a claim for damages against the lender.

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

• Write down the date of the notice of sale.
• Send a written request for a statement of arrears and expenses.
• Gather income, debt and property information.
• Contact the lender about relief in writing.
• Get legal advice before the sale date.

Frequently asked questions