Can You Stop a Power of Sale by Paying the Arrears in Ontario?

Getting a notice of sale on your mortgage is frightening, and many people assume the lender can now demand the full loan balance at once. In Ontario, the law gives a borrower in default a way to put the mortgage back in good standing, and that can stop the sale from going ahead.

This article explains how that right works, how the timeline runs, what you can ask your lender to provide, and where the right ends. It is general information, not advice on your own file, and timing matters, so speak to a lawyer quickly if you have received a notice.

The right to catch up: section 22 of the Mortgages Act

Many mortgages say that if you default, the whole balance becomes due. That is called an acceleration clause. Under section 22(1) of the Mortgages Act, despite any agreement to the contrary, a borrower in default can stop the lender from enforcing that clause by paying the amount due under the mortgage and the lender's necessary expenses.

The amount due means the arrears, not money that is only due later. So you are not required to pay off the entire loan to stop enforcement, even if your mortgage contract says otherwise. What counts as a necessary expense can be disputed, which is why getting a written figure matters.

The timeline: 15 days, then at least 35 days

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. It also cannot sell until at least 35 days after the notice has been given.

That 35-day notice must go to every person having an interest in the mortgaged property. While the notice period runs, the lender cannot start any further proceeding or action to enforce the mortgage until the time stated in the notice has passed, unless a Superior Court judge permits it.

• Day 15 of default at the earliest: the lender may give notice of sale.
• At least 35 days after the notice: the earliest the lender may sell.
• Mortgages with no power of sale clause follow a different statutory route, with three months' default and 45 days' notice.

Asking for a statement of arrears

You can 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 answer without reasonable excuse, or gives an incomplete or incorrect answer, its enforcement rights are suspended until it complies.

The lender also cannot charge a fine, penalty or interest rate on arrears that increases the charge on the arrears beyond the rate payable on principal not in arrears. When you receive the statement, check it against your own records.

• Make your demand in writing and keep a copy.
• Note the date you sent it and how you sent it.
• Compare each line of the statement to your payment history.
• Question any penalty-style charge on the arrears.
• Ask a lawyer to review any figure you do not understand.

Who else has rights: spouses and other interested people

A spouse who has no ownership interest in the matrimonial home but has a right of possession has the same right of redemption or relief against forfeiture as the owner-spouse. That spouse is entitled to the same notice of the lender's claim and its enforcement.

Others with an interest in the property must also receive the notice of sale. If you are not sure who has an interest, such as a second lender, a lawyer can help you sort out who should have been notified.

The warning: once the sale closes, it is too late

Once the power of sale closes, section 22 no longer applies, and the borrower is limited to a claim for damages against the lender. Where a notice was given in professed compliance with the Mortgages Act, the purchaser's title cannot be attacked because of a defect in the sale process, and anyone harmed has a remedy against the lender who sold. That protection does not extend to a purchaser who had actual notice of the defects in the sale process.

In practice, this means the right to stop enforcement by paying the arrears and expenses is only available before the sale closes. If you think something went wrong with the sale process, how this applies depends on your situation, so it is worth confirming with a lawyer as early as you can.

Other relief and what to do next

Lenders may offer relief, but they do not have to. A payment deferral is an agreement with the lender, not a right; it usually lasts up to 4 months, and interest keeps accruing and is usually added to the principal. Other options include capitalizing missed payments, interest-only payments for a limited time, and a sale-by-borrower plan in which the owner sells at fair market value and can usually stay up to 90 days.

• Gather your mortgage, the notice of sale and your payment records.
• Note the date the notice was given and count the days.
• Send a written demand for a statement of arrears and expenses.
• Contact the lender about relief options and get any agreement in writing.
• Speak to a lawyer promptly, before the sale closes.

Frequently asked questions