- With a power of sale clause, the lender cannot give notice until the default has lasted at least 15 days and cannot sell until at least 35 days after the notice.
- The notice of sale must be on Form 1 and must go to every person with an interest in the property.
- Once the sale closes, your options narrow sharply, so timing matters.
Missing mortgage payments can feel like a runaway train. In Ontario, though, a lender who wants to sell your home under a power of sale has to follow a set process, and that process has minimum waiting periods built in.
This article walks through the usual order of events, from default to closing. It explains general rules only. Your mortgage terms and your facts matter, so a lawyer should confirm where you stand.
Step one: default and the first waiting period
A power of sale is a right written into most mortgages that lets the lender (the mortgagee) sell the property if you default. Where the mortgage contains a power of sale, the lender cannot give notice of exercising it until the default has continued for at least 15 days.
If your mortgage has no power of sale clause, a different statutory power of sale applies. It only kicks in after three months of default and requires 45 days of notice to people with an interest in the property.
Step two: the notice of sale
The notice of sale must be in Form 1, called Notice of Sale under Mortgage, which is prescribed under the Mortgages Act. The current version has been in effect since January 1, 2022.
The notice must go to every person having an interest in the mortgaged property. That can include other lenders and, in some cases, a spouse. A spouse with a right of possession in the matrimonial home, even without ownership, is entitled to the same notice of the lender's claim and its enforcement as the owner-spouse. Where someone entitled to notice is an execution creditor, the notice may go to the lawyer who issued the execution, or to the creditor if there is no lawyer.
How the notice is served matters. Service is governed by section 33(1) of the Mortgages Act, and a notice has been found invalid where it was not served personally as that section required in the case. On the other hand, a notice sent in the manner the statute prescribes is not defective just because the recipient never actually received it. Open your mail and keep everything.
Step three: the waiting period
The lender cannot sell until at least 35 days after the notice is given. Once a notice of sale has been given, the lender also cannot start any further proceeding to enforce the mortgage until the time stated in the notice has passed, unless a Superior Court judge permits it.
This waiting period is usually your best window to act. Common steps include:
- Paying the arrears and the lender's necessary expenses to stop the lender enforcing the acceleration clause.
- Requesting a written statement of arrears and expenses, which the lender must answer within 15 days.
- Talking to the lender about relief, or arranging to sell the home yourself.
- Getting legal advice about the notice and the amounts claimed.
Step four: possession, sale and closing
A lender's possession of the property could not be lawful until after the notice of sale period expired. Unless the mortgage itself requires notice, a lender does not have to give notice before taking possession once it is otherwise entitled to it. A writ of possession (Form 60C) may be issued only with leave of the court.
When the lender sells, it 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.
When the sale is registered, the Transfer under Power of Sale must state that notice of sale was given on a stated date, that the charge was in default at that time, and that the sale is authorized under the charge and the Mortgages Act.
After closing, and what to do next
Once the power of sale closes, the borrower can no longer stop enforcement by paying arrears and is limited to a claim for damages against the lender. A buyer's title generally cannot be attacked for a defect in the sale process where notice was given in professed compliance with the Act, though anyone harmed has a remedy against the lender.
A lender may also claim a shortfall if the sale does not cover the debt. That claim must be started within the later of 10 years after the cause of action arose and 10 years after the liable person's interest in the land was conveyed or transferred. The lender does not lose that longer period just because the property was sold.
- Note the date you were in default and the date on the notice of sale.
- Keep every letter, notice and envelope.
- Ask the lender in writing for a statement of arrears.
- Check who else has an interest in the property, including a spouse.
- Speak with a lawyer early, before the sale date arrives.
Frequently asked questions
How long does a power of sale take in Ontario?
The statute sets minimums rather than a total: at least 15 days of default before notice, then at least 35 days after notice before a sale. Actual timing depends on the lender and the circumstances.
Can the lender take possession during the 35 days?
The Court of Appeal has held that a lender's possession could not be lawful until the notice of sale period expired. Your mortgage terms may also matter, so confirm with a lawyer.
What if I never received the notice?
A notice sent in the manner the statute prescribes is not defective just because the recipient never received it. Whether it was properly sent is a question a lawyer can review.
Does the lender have to get the best price?
The lender must take reasonable precautions to obtain the true market value as of the date of sale. A hasty or secretive sale can raise doubts about the price.
Sources
- Ontario.ca – Power of sale assignments (policy) — ontario.ca
- CanLII – Mortgages Act, R.S.O. 1990, c. M.40 — canlii.org
- Ontario Court Forms – Mortgage Act Forms — ontariocourtforms.on.ca
- Court of Appeal for Ontario – Hume v. 11534599 Canada Corp., 2022 ONCA 575 — ontariocourts.ca
- Court of Appeal for Ontario – Martin v. 11037315 Canada Inc., 2022 ONCA 322 — ontariocourts.ca
- Court of Appeal for Ontario – Sheth v. Randhawa, 2022 ONCA 89 — ontariocourts.ca
- Court of Appeal for Ontario – 2544176 Ontario Inc. v. 2394762 Ontario Inc., 2022 ONCA 529 — ontariocourts.ca
- CanLII – Family Law Act, R.S.O. 1990, c. F.3 — canlii.org
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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