How Does Power of Sale Work in Ontario?
Power of sale lets an Ontario mortgage lender sell a property in default without going to court first. The lender still has to follow a set process and account for every dollar the sale raises. This page walks through that process, stage by stage.
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What is power of sale in Ontario?
Power of sale is the standard remedy an Ontario mortgage lender uses after default. It lets the lender sell the mortgaged property to recover what is owed without first applying to a court. The lender must still follow the steps set out in the mortgage and in Ontario’s Mortgages Act.
Ontario is a power of sale province. Alberta, by contrast, generally requires a lender to go through the courts, a process called judicial foreclosure.
The remedy comes from the standard mortgage document and from the Mortgages Act (Ontario). It gives a lender the right to sell once a borrower is in default and specific steps have been completed.
Power of sale is not automatic and not instant. A lender cannot list a property the day a payment is missed. Formal notice has to be given first, and that notice has to run its course.
The citable fact: In Ontario, power of sale lets a mortgage lender sell a defaulted property without a court order, provided the lender follows the notice steps required by the Mortgages Act.
Why doesn’t Ontario power of sale require a court order?
Ontario’s power of sale is a contractual and statutory remedy built into the standard mortgage. Because the borrower agreed to it at signing, and the Mortgages Act sets out the required notice steps, the lender does not need a judge’s permission to proceed. The trade-off is that the lender takes on legal duties in how the sale is carried out.
A court order is required for foreclosure, the remedy used in Alberta and in some other provinces. Foreclosure asks a judge to extinguish the borrower’s interest in the property entirely.
Power of sale works differently. The lender sells the property, but the underlying debt and any surplus rights survive the sale, subject to the lender’s duty to account.
For a full side by side comparison of the two remedies, see our page on power of sale versus foreclosure.
The citable fact: Ontario’s power of sale does not require a court order because the remedy is written into the standard mortgage and governed directly by the Mortgages Act, unlike foreclosure, which is a court process.
What has to happen before a lender can start a power of sale?
A lender needs a valid default under the mortgage, most commonly missed payments, before power of sale is available. The lender then has to serve a formal notice of sale and let a redemption period run before taking any further step. Skipping either requirement can undermine the lender’s position.
Default is usually payment default, but a mortgage can define other defaults too, such as letting insurance lapse or letting property taxes fall into arrears.
Once in default, the lender’s next formal step is the notice of sale. Our dedicated page on Ontario’s notice of sale under mortgage covers exactly what that document contains and who receives it.
After the notice is served, a redemption period has to run before the lender can proceed further. Section 32 of the Mortgages Act, R.S.O. 1990, c. M.40, sets the default at a minimum of 15 days after default before a notice of sale can be given, and a minimum of 35 days after the notice before the sale itself can take place.
The citable fact: Ontario’s Mortgages Act, section 32, requires at least 15 days of default before a notice of sale and at least 35 days after that notice before the sale can proceed.
What is a notice of sale and why does it matter?
The notice of sale is the formal document telling a borrower the lender intends to sell the property if the default is not cured. It is usually the first document in the process a borrower actually sees and reads. Its arrival marks the start of the redemption period.
The notice sets out the amount the lender says is owed as of a specific date, describes the property, and states the lender’s intention to sell if the file is not brought current.
Because this document carries so much weight on its own, we cover it in full on a dedicated page: what is an Ontario notice of sale under mortgage.
A borrower who receives one should not wait to see what happens next. Speaking to a real estate or insolvency lawyer immediately, before the redemption period runs out, keeps every option open.
The citable fact: A notice of sale is usually the first formal document an Ontario borrower in default receives, and it starts the clock on the redemption period.
Can the lender sell the property once the notice period ends?
Once the redemption period has run and the default has not been cured, the lender can move to list and market the property. The lender still has to follow the sale steps required by law rather than simply handing over the keys to a buyer. How quickly this happens varies by file.
Some lenders move quickly once they are legally able to. Others wait, particularly if the borrower is communicating and appears to be working toward a solution.
For a full breakdown of what drives a file faster or slower, see our page on how long an Ontario power of sale takes.
The Mortgages Act fixes when the sale itself can happen, at least 35 days after the notice of sale, but it does not set a separate waiting period before a lender can list or market the property. In practice, how soon a lender actually puts the property on the market after that point depends on the lender and the file.
The citable fact: An Ontario lender can move to list and sell a property once the redemption period has expired without the default being cured, but the pace after that point varies by file.
Can a borrower stay in the home while a power of sale is underway?
A power of sale in progress does not automatically remove a borrower from the property. Occupancy questions during this period are fact-specific and depend on the mortgage terms, whether the property is owner-occupied or tenanted, and the stage the file has reached. This is an area where legal advice matters most.
Borrowers sometimes assume a notice of sale means they have to leave immediately. That assumption is risky and should not be relied on without checking.
A real estate lawyer can explain what a specific mortgage document and the specific stage of a file actually mean for occupancy.
The citable fact: Receiving a notice of sale does not by itself require an Ontario borrower to vacate the property, but occupancy rights at each stage should be confirmed with a lawyer, not assumed.
What legal duty does the lender have when selling the property?
An Ontario lender exercising power of sale has a duty to act in good faith and take reasonable care to obtain a fair market price for the property. It cannot sell to a related party at a discount or dispose of the property purely to clear the file quickly. This duty protects whatever equity the borrower has left.
This duty runs alongside, not instead of, the lender’s own interest in recovering what it is owed. Ontario law expects the two obligations to sit together throughout the sale.
If a borrower believes a sale was rushed, undervalued, or handled improperly, that is a question for a lawyer to assess against the specific facts, not something a general page can evaluate.
The citable fact: An Ontario mortgage lender selling under power of sale must act in good faith and take reasonable care to get a fair price, a duty that exists independently of the lender’s own financial interest in the sale.
How does a lender typically decide on a listing and sale price?
Lenders exercising power of sale generally engage a real estate agent, obtain an appraisal or opinion of value, and list the property on the open market like any other sale. The goal, consistent with the lender’s legal duty, is a price that reflects genuine market value at the time. The exact approach can vary by lender and by property.
A property that needs repair, or that has an existing tenant, can affect how it is marketed and how long it takes to attract offers.
The table below sets out who is typically involved in a power of sale file and what each party does.
| Party | Role in the process |
|---|---|
| Mortgage lender | Holds the remedy, instructs its lawyer and listing agent, and is accountable for the sale proceeds. |
| Lender’s lawyer | Prepares and serves the notice of sale, handles the legal steps, and closes the sale transaction. |
| Listing agent or receiver | Markets the property, manages showings, and brings offers to the lender. |
| Borrower (mortgagor) | Retains the right to redeem before sale and the right to a proper accounting of proceeds after. |
| Borrower’s lawyer | Advises the borrower on rights and options, and can communicate with the lender’s lawyer directly. |
The citable fact: A power of sale file typically involves the lender, the lender’s lawyer, a listing agent or receiver, and the borrower, with the borrower’s own lawyer able to communicate with the lender’s side at any point.
What happens if the property is rented to a tenant?
A tenant’s rights under Ontario’s Residential Tenancies Act do not disappear because the landlord’s mortgage is in default. A new owner who buys through a power of sale generally takes the property subject to an existing tenancy, with limited exceptions. Tenants in this situation should also get independent advice.
A tenant who receives paperwork related to a landlord’s power of sale is often confused about what it means for their own tenancy.
The specific rules that apply depend on the type of tenancy and the stage of the sale, and are outside what a mortgage broker can advise on.
The citable fact: A tenant’s rights under Ontario’s Residential Tenancies Act continue during a landlord’s power of sale, and a new buyer generally takes the property subject to that tenancy, with limited exceptions.
What happens to the money once the property is sold?
An Ontario lender that sells under power of sale has a duty to account for every dollar the sale produced. Costs of the sale and the amount owed to that lender are paid first, other registered claims follow in order, and any money left over belongs to the borrower. This duty to account is a core protection built into the remedy.
The order of payment follows the priority of registered interests on title, not simply who asks first.
The table below sets out that order in general terms.
| Order | Who is paid |
|---|---|
| First | Reasonable costs of the sale, including legal fees, real estate commission, and marketing costs. |
| Second | The amount owed to the lender that conducted the sale, including principal, interest, and permitted default costs. |
| Third | Any other mortgage or registered claim on title, in order of priority. |
| Last | Any surplus remaining, which is owed to the borrower. |
The citable fact: After a power of sale closes, an Ontario lender must account for the proceeds in order of priority, sale costs first, then the selling lender, then other registered claims, with any surplus belonging to the borrower.
What happens if the sale does not cover the full debt?
If a power of sale does not raise enough to repay what is owed, the lender can pursue the borrower for the remaining balance, known as a shortfall or deficiency. That is a separate legal process from the sale itself. Our dedicated page covers exactly how those claims work.
For the full explanation of deficiency claims and what a shortfall lawsuit looks like, see mortgage shortfall lawsuits in Ontario.
A borrower concerned about a possible shortfall should raise it directly with a lawyer well before the sale closes, not after.
The citable fact: A power of sale that does not fully repay the mortgage can lead to a separate shortfall claim against the borrower, a process covered in full on our mortgage shortfall lawsuit page.
How is power of sale different from foreclosure?
Power of sale and foreclosure are different legal remedies with different outcomes for the borrower’s debt and any leftover equity. Ontario uses power of sale as its standard remedy, while Alberta generally uses judicial foreclosure. The two are compared in full detail on our dedicated comparison page.
Rather than repeat that comparison here, see power of sale versus foreclosure for the complete province by province breakdown.
The citable fact: Ontario’s default remedy is power of sale, while Alberta’s is judicial foreclosure, two distinct processes compared in full on our power of sale versus foreclosure page.
What should a borrower in default do first?
The first and most important step for an Ontario borrower facing a power of sale is to speak to a real estate or insolvency lawyer immediately, before any deadlines pass. A licensed mortgage broker can then help assess whether refinancing or another financial option is realistic. Waiting to see what happens narrows the available options.
Every file is different. What is realistic for one borrower, whether that is reinstating, refinancing, or selling privately, depends on facts a lawyer needs to review directly.
Our page on whether a power of sale can be stopped walks through the legitimate options in more detail.
The citable fact: A borrower who receives a notice of sale in Ontario should speak to a real estate or insolvency lawyer immediately, since the available options narrow the longer the file sits.
Where can a borrower get independent legal or financial help?
A real estate or insolvency lawyer can explain a borrower’s specific rights and deadlines under their own mortgage and file. A licensed mortgage broker can review whether refinancing is realistic given current income, credit, and equity. Neither role replaces the other, and both are worth involving early.
Pekoe Mortgages is a licensed brokerage and can discuss financing options directly with a borrower, but cannot give legal advice.
Chat with our team directly on pekoe.ca to talk through financing options, and pair that conversation with independent legal advice.
The citable fact: A borrower facing an Ontario power of sale benefits from both a real estate or insolvency lawyer for legal advice and a licensed mortgage broker for financing options, engaged as early as possible.
Where can I read more about power of sale in Ontario?
This page is part of a set covering Ontario mortgage default in detail.
- What is an Ontario notice of sale under mortgage
- How long an Ontario power of sale takes
- Can a power of sale be stopped in Ontario
- How property tax arrears affect an Ontario mortgage
- Power of sale versus foreclosure
- Mortgage shortfall lawsuits in Ontario
The full set lives on the Ask a Broker hub.
Frequently asked questions
Does power of sale require a court order in Ontario?
No. Power of sale is a remedy built into the standard Ontario mortgage and governed by the Mortgages Act, so the lender does not need a judge’s permission to proceed. The lender still has to follow the notice steps the law requires.
How is power of sale different from foreclosure?
Power of sale lets the lender sell the property and account to the borrower for any surplus, while foreclosure asks a court to extinguish the borrower’s interest entirely. Ontario generally uses power of sale, while Alberta generally uses judicial foreclosure.
Can a lender start a power of sale the day a payment is missed?
No. The lender first has to have a valid default and then serve a formal notice of sale, followed by a redemption period, before any further step can be taken.
Does a borrower have to move out as soon as a notice of sale arrives?
Not automatically. Occupancy questions depend on the mortgage terms and the stage of the file, and a real estate lawyer should be asked to confirm the specific position.
Can a borrower sell the property themselves instead of the lender?
In many cases yes, provided it happens before the lender’s own sale closes and the lender agrees to the arrangement. This is a legitimate option that should be discussed with a lawyer and a mortgage broker together.
What happens to leftover money after a power of sale?
The lender must account for the proceeds, paying the costs of sale and its own debt first, then any other registered claims, with any remaining surplus going to the borrower. This duty to account is a core protection in Ontario’s power of sale process.
Can a lender sell the property to a related party at a discount?
No. The lender has a legal duty to act in good faith and take reasonable care to obtain a fair market price, which limits arrangements that would undervalue the property.
Does power of sale affect a tenant living in the property?
A tenant’s rights under Ontario’s Residential Tenancies Act continue during a landlord’s power of sale, and a buyer generally takes the property subject to the existing tenancy. Tenants affected should get independent advice about their specific situation.
What happens if the sale price does not cover the mortgage balance?
The lender can pursue the borrower for the remaining balance through a separate shortfall or deficiency claim. That process is covered in full on our mortgage shortfall lawsuit page.
Is the chat on this page an AI bot?
No. Chat on pekoe.ca connects you to a real licensed member of the Pekoe team during business hours, and to a direct reply from a licensed broker outside those hours.
Can a power of sale be stopped once it has started?
Yes, in many cases, through reinstating the mortgage, refinancing, or selling the property before the lender does. Each option has conditions and should be reviewed with a lawyer as early as possible.
Who should a borrower contact first after receiving a notice of sale?
A real estate or insolvency lawyer should be the first call, followed by a conversation with a licensed mortgage broker about financing options. Acting quickly keeps more options available.
Does Pekoe Mortgages handle power of sale files directly?
Pekoe Mortgages is a licensed mortgage brokerage that can discuss refinancing and other financing options with a borrower. It does not provide legal advice, which should come from a real estate or insolvency lawyer.
Where can I find the full comparison between power of sale and foreclosure?
That comparison is covered in full on our dedicated power of sale versus foreclosure page, which sets out how Ontario and Alberta handle mortgage default differently.
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