Power of Sale After Separation: Spouse Rights on the Matrimonial Home

You live in the family home, but your name is not on the mortgage. Your spouse has fallen behind, perhaps after a separation, and now a power of sale notice has arrived or you have heard the lender plans to sell. You may feel you have no say. In Ontario, that is often not the case.

This article explains the notice and possession rights the Family Law Act gives a spouse, how they interact with a lender's power of sale, and what options may be available. Every situation turns on its facts, so treat this as a starting point for a conversation with a lawyer.

The basic rule: a matrimonial home is treated differently

Under s. 21 of the Family Law Act, no spouse may dispose of or encumber an interest in a matrimonial home unless a statutory exception applies, such as the other spouse joining in or consenting. A mortgage is an encumbrance, so this rule matters when a home is mortgaged.

Whether a particular mortgage was properly given, and whether the lender could rely on it, depends on the facts: who signed, when, and what the lender knew. A lawyer can review the documents. A court can set aside a transaction that breached s. 21.

Notice and redemption rights when a lender enforces

Section 22 gives a spouse with a s. 19 possession right the same redemption and relief rights as the other spouse against anyone enforcing a lien, encumbrance or execution on the home. That spouse also gets the same notice of the enforcement.

On the lender's side, where the mortgage has a power of sale, a sale may take place once the borrower has 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 applies, after three months of default and 45 days' notice to interested persons. The notice form is Form 1, Notice of Sale under Mortgage.

The sale papers must include a solicitor's declaration naming everyone entitled to notice and stating they were served, plus declarations of service. A statement of spousal status is required for every person whose spouse was not served with notice. If notice was required but not given, a court order may be obtained dispensing with service.

If you were not served and you think you should have been, tell a lawyer right away. 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, and a person harmed has a remedy against the person who exercised the power of sale.

Protecting your position

A spouse's right to possess the matrimonial home is not an interest in land, so it cannot be protected by registering a caution. Whether another kind of registration on title makes sense in your case is worth confirming with a lawyer.

A court can also step in. Despite the s. 19 right of possession, a court may make orders about the matrimonial home and its contents, including exclusive possession, safekeeping and preservation. On application, a court may authorize a disposition or encumbrance without consent where, for example, the spouse cannot be found, is incapable, or unreasonably withholds consent. The court may also dispense with s. 22 notice.

What happens to the money and to your living situation

If the home is sold under power of 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. Whether you have a claim to part of that surplus through a separation agreement or a family law claim depends on your situation and is worth raising with a lawyer.

A sale also affects who lives in the home. Court leave is needed for a writ of possession, and the court may grant leave only if satisfied that all persons in actual possession of any part of the land have had sufficient notice of the proceeding to enable them to seek relief.

What to do next

• Keep every notice, envelope and letter from the lender, and write down when each arrived.
• Collect your marriage or separation details, the title, and any separation agreement or court order.
• Ask a lawyer whether to register a designation of matrimonial home.
• Ask whether the mortgage was given properly under the Family Law Act.
• Do not wait for the sale date. Raise your concerns while the process is still moving.

If there is any risk to your safety at home, tell a lawyer, because the court has powers to make orders about possession.

Frequently asked questions