Power of sale is the right of a mortgage lender to sell your property after you fall behind on your mortgage, without first going to court to take ownership. In Ontario it is the most common way lenders enforce a defaulted mortgage, it is governed by the Mortgages Act, and the law gives you a defined window to fix the default and keep your home before any sale can close.
If you have just received a Notice of Sale, the most useful thing to understand is that you usually have more time and more options than the letter makes it feel. This guide explains how the process works, the deadlines that matter, your rights as a homeowner, the practical ways to stop a sale, and what to check before you buy a power of sale property. It reflects Ontario law under the Mortgages Act, current as of the date above.
What is a power of sale in Ontario
A power of sale lets your lender, the mortgagee, sell your home to a buyer and use the money to pay off what you owe. You, the mortgagor, keep title until the sale closes. The lender does not take ownership. Title passes straight from you to the buyer, with the lender signing the closing documents as the party exercising the power of sale. Any money left after the debt and the lender’s costs comes back to you.
The power comes from one of two places. Almost every Ontario mortgage contains its own power of sale clause, so most cases run on that contractual right. The Mortgages Act also contains a statutory power of sale that applies where the mortgage is silent, and it can be used once a payment default has continued for three months. Either way, the notice rules in the Act apply, and those rules are where your protections live.
Mortgage arrears in Ontario remain low by historical standards, but they have been climbing. CMHC reported that the mortgage delinquency rate in Toronto rose from 0.15 percent in the second quarter of 2024 to 0.24 percent in the second quarter of 2025, and it has projected further moderate increases through 2026 as more homeowners renew at higher rates (CMHC, Fall 2025 Residential Mortgage Industry Report). If you are behind, you are not alone, and acting early matters more than the size of the gap.
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Power of sale compared with foreclosure
People often use the two words as if they mean the same thing. They do not. In a power of sale the lender sells the property and returns any surplus to you. In a foreclosure the lender goes to court to take ownership of the property itself, keeps it, and keeps any later gain in value. The table below sets out the practical differences.
| Factor | Power of sale | Foreclosure |
|---|---|---|
| Who ends up owning the home | Title stays in your name and passes straight to the buyer when the sale closes. | The lender applies to the court to take title to the property itself. |
| Court involvement | None is needed unless someone goes to court to contest it. | It is a court action from the start, usually under the mortgage action rules. |
| Typical speed | Faster. Often a few months for a straightforward, uncontested file. | Slower. Often a year or more because of the court steps. |
| What happens to surplus | Any money left after the debt and costs is returned to you. | The lender keeps the property and any later gain in value. |
| Your right to recover the home | You can cure the default and stop the sale up until it closes. | Your right to redeem ends once the court grants final foreclosure. |
| How common it is in Ontario | The usual choice for most lenders. | Uncommon, mostly used where there is little or no equity. |
Foreclosure is uncommon in Ontario. It is slower, it runs through the court, and it gives the lender no surplus to chase. Most lenders choose power of sale because it is faster and lets them recover the debt and their costs while returning the rest to you.
How the power of sale process works, step by step
Here is the path a power of sale follows, and what each stage means for you.
1. Default
It starts when you fall behind. That usually means missed payments, but it can also be a breach of another term, such as letting your property insurance lapse or failing to pay property tax. The lender confirms the default and checks the mortgage for a power of sale clause.
2. Demand and the 15 day floor
The lender often sends a demand letter first, asking you to bring the mortgage current and warning of enforcement. Under section 32 of the Mortgages Act, the lender cannot serve the formal Notice of Sale until the default has continued for at least 15 days.
3. Notice of Sale under Mortgage
This is the key document. Section 31 requires the lender to serve it on you and on everyone else with a registered interest in the property, including any guarantors, second mortgage holders and lien claimants. It sets out the amount you need to pay to bring the mortgage back into good standing. Read it carefully and date stamp the day it arrived, because the clock runs from there.
4. Redemption period
The sale cannot be made for at least 35 days after the notice is given, with a couple of extra days added when it is served by mail. This window is called the redemption period, and it is your chance to fix things. Section 42 of the Act bars the lender from taking other steps during this period, so it cannot sue you, take possession or sign a sale agreement while the redemption period runs. If it jumps the gun, the notice can be set aside.
5. Possession and marketing
If you have not cured the default by the end of the redemption period, the lender can take possession, which may require a court order known as a writ of possession if the home is occupied, and then list the property for sale, usually on MLS through a brokerage. The lender must act in good faith and take reasonable steps to obtain fair market value. It cannot sell to itself, and it cannot dump the property at a fire sale price just to close the file.
6. Sale and distribution of the money
Once the home sells, the proceeds are applied in the order set out in section 27 of the Mortgages Act. The costs of the sale come first, then the interest and principal owing on the mortgage, then any later mortgages and lien claims by their priority, then certain tenant deposits, and the residue is paid to you. If the sale does not cover everything you owe, the lender can still pursue you for the shortfall.
| Stage | What happens | Typical timing |
|---|---|---|
| You miss a payment, or breach another term such as property tax or insurance | The lender confirms the default and reviews the mortgage for a power of sale clause | Day zero |
| Default continues and the lender prepares to act | The lender cannot issue the formal Notice of Sale until the default has lasted at least 15 days | At least 15 days |
| Notice of Sale is served on you and everyone with a registered interest | Section 31 sets out who must receive it and what it must say | After the 15 days |
| Redemption period runs | You can cure the default and stop the sale. The lender cannot sell, sue or take possession during this window | At least 35 days from the notice |
| Possession and marketing | If the default is not cured, the lender takes possession and lists the home, usually on MLS | Varies |
| Sale closes and proceeds are distributed | Funds are applied in the order set by section 27, with any surplus returned to you | Often three to six months in total |
In our practice, the single biggest factor in how these files end is how early the homeowner picks up the phone. The clients who call us the week the Notice of Sale arrives almost always have more room to work with than the ones who wait until the property is already listed.
The day the Notice of Sale arrives is the day to call a lawyer, not the day before the sale closes. Almost everything we can do to protect your home and your equity depends on time, and time is the one thing a power of sale takes away quickly.
Demet Altunbulakli, Founding Lawyer, Insight Law
Your rights as a homeowner during a power of sale
A power of sale is not a free hand for the lender. Ontario law gives you several rights, and they are worth knowing before you make any decision under pressure.
- You can redeem until the sale closes. You can bring the mortgage back into good standing and stop the process at any point before the sale is final, not only during the 35 days.
- You often do not have to pay the entire balance. If the lender has demanded the full amount under an acceleration clause, section 22 of the Mortgages Act usually lets you reinstate the mortgage by paying the missed payments plus the lender’s reasonable costs, rather than the whole balance, as long as you act before the redemption period ends and the term has not already matured.
- You are entitled to the surplus. Under section 27, money left after the debt and costs comes back to you. This is the opposite of foreclosure, where the lender keeps it.
- You are entitled to a commercially reasonable sale. The lender must act in good faith and take reasonable steps to get true market value. If it sells far below value without proper effort, you may have a claim, although you would need to show that a higher price was achievable.
- You can challenge a defective notice. A Notice of Sale that gets the timing wrong, is unsigned, or is not served on the right people may be invalid, which can buy time or stop a sale.
- You are entitled to a proper accounting. After the sale the lender must account to you for how the money was applied.
How to stop a power of sale
Most homeowners want one answer above all others, which is how to keep their home or at least protect their equity. There is rarely a single right move. The best option depends on how much equity you have, whether your income can support new financing, and how much time is left. Here are the realistic paths and when each one fits.
Cure the default
Pay the arrears and the lender’s reasonable costs to bring the mortgage current. This is the cleanest fix and works best when the shortfall is small and the cause was temporary, such as a short gap in income. Remember section 22, you often need only the arrears and costs, not the full balance.
Refinance or arrange a second mortgage
Use the equity in your home to pay out the arrears, or replace the mortgage entirely. This fits when you have equity and enough income to support new financing. A real estate lawyer can help you close a refinance quickly before the sale proceeds.
Sell on your own terms
A sale you control, on the open market with proper exposure, almost always nets more than a lender driven sale and protects your equity. This fits when you have equity but cannot realistically keep the home. Selling before the lender lists the property keeps you in the driver’s seat.
Negotiate with the lender
Lenders generally prefer to be paid over the cost and delay of a sale. A repayment plan, a short forbearance, or adding the arrears to the balance may be on the table, especially if you reach out early and come with a concrete proposal.
Get advice on insolvency options
If your problem is broader than the mortgage, a consumer proposal or bankruptcy can pause some creditor actions. Mortgage security is treated specially in insolvency, so this is a route to take only with proper advice, not a do it yourself fix.
Whatever path fits, the practical takeaway is the same. Act before the redemption period ends. The options narrow fast once the home is listed, and they close almost entirely once a sale is signed.
Thinking about buying a power of sale property
Power of sale homes can be a real opportunity, but they are not automatic bargains, and they come with risks an ordinary purchase does not. Go in with your eyes open.
- They are sold as is, where is. The lender gives no warranties about condition. Budget for repairs you cannot see, from cosmetic fixes to structural problems.
- The agreement favours the lender. The lender strikes the usual seller representations and warranties and adds a schedule of terms that you generally cannot negotiate.
- Title and liens need careful searching. Executions, construction liens and other registered interests must be cleared from the proceeds. Your lawyer confirms you will receive clear title before you commit.
- Tenants may come with the home. Under the Residential Tenancies Act, a tenant does not automatically leave because the property changed hands. Vacant possession is not guaranteed, and you cannot simply evict.
- Financing can be harder. Some lenders are cautious about distressed or damaged properties, especially if the home is not in liveable condition.
- The price still has to be fair. The selling lender owes a duty to obtain market value, so do not expect fire sale pricing simply because the home is under power of sale.
- You are protected if the lender slips. Sections 35 and 36 of the Mortgages Act give a buyer who relies on the lender’s statutory declarations of compliance good title even if the lender made a procedural error, leaving the former owner’s remedy against the lender rather than against you.
Frequently asked questions
How long does a power of sale take in Ontario?
The law sets the floor. A lender cannot serve the Notice of Sale until the default has lasted at least 15 days, and cannot sell for at least 35 days after the notice. In practice a straightforward, uncontested power of sale often runs around three to six months from default to closing. A contested file, where the borrower brings a motion or there are title complications, can stretch well beyond a year.
Can I stop a power of sale after I receive the Notice of Sale?
Yes, in most cases. You can bring the mortgage back into good standing and stop the sale at any time before it closes. Thanks to section 22 of the Mortgages Act, you often need to pay only the arrears and the lender’s reasonable costs rather than the entire balance, as long as you act before the redemption period ends. The earlier you move, the more options you have, from curing the default to refinancing or selling on your own terms.
Do I lose all my equity in a power of sale?
No. After the home sells, section 27 of the Mortgages Act applies the money to the sale costs, then the mortgage debt, then any later claims, and returns the surplus to you. That is a key difference from foreclosure, where the lender keeps the property and any gain. If the sale falls short of what you owe, however, the lender can pursue you for the difference.
What is the difference between power of sale and foreclosure?
In a power of sale the lender sells your home, recovers the debt and its costs, and returns any surplus to you. In a foreclosure the lender goes to court to take ownership of the property itself and keeps it, along with any later increase in value. Power of sale is faster and far more common in Ontario.
Will a power of sale affect my credit?
Yes. Missed mortgage payments and the enforcement that follows are reported to the credit bureaus and can stay on your record for years, which makes future borrowing harder and more expensive. The sooner you resolve the default, the sooner you can begin to rebuild. This is one more reason to deal with a notice early rather than letting it run.
Are power of sale homes a good deal for buyers?
Sometimes, but not because they are sold cheaply. The selling lender owes a duty to obtain fair market value, so these are priced at market, not at a discount by default. The opportunity comes from homes that need work or have been mismanaged. The risks come from the as is sale, the lender friendly contract, possible occupants and title issues.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
