Ontario power of sale runs on notice periods, not court hearings: 15 days of default, then 35 days after notice. Here is what the Mortgages Act requires, what the lender owes the borrower, and what a buyer takes on.
Written by Hamidreza Etebarian on
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A lender in Ontario does not need a judge to sell a home out from under a borrower who has stopped paying. It needs a notice and a calendar. Section 32 of the Mortgages Act, R.S.O. 1990, c. M.40 says notice of exercising the power of sale cannot be given until the default has continued for at least fifteen days, and the sale cannot be made for at least thirty-five days after the notice has been given. That is the entire gate. No hearing, no judge-supervised bidding, no order confirming the sale. Buyers who learned the process in British Columbia, where every foreclosure runs through the Supreme Court, tend to misread an Ontario power of sale in the direction that costs money.
Most residential mortgages in Ontario contain their own power of sale, and Part III of the Mortgages Act governs how that contractual power is exercised. The fifteen-day and thirty-five-day periods in section 32 apply to it. Section 38 makes those notice rules paramount despite any agreement to the contrary, so a mortgage cannot contract out of them.
Where a mortgage contains no power of sale, section 24 supplies one three months after default in payment, and section 26 then requires forty-five days notice in the form prescribed by the regulations. Section 37 works one way only: where the mortgage itself sets a longer default period or a longer post-notice period, the Act does not cut it down.
Section 31 lists the people entitled to the notice, and the list is wider than the borrower. Where the property is registered under the Land Titles Act, notice goes to everyone appearing on the parcel register and the index of executions. Where the Registry Act applies, it goes to everyone on the abstract index and the sheriff's index of writs. It also goes to the Crown or another public authority holding a statutory lien the lender knows about in writing, to anyone whose interest the lender has actual written notice of, and to the minister responsible for the Forfeited Corporate Property Act, 2015 where the last registered owner is a dissolved corporation.
Service is by personal delivery or registered mail under section 33, and section 34 deems a mailed notice given on the day it was mailed rather than the day it arrived. The clock does not wait for the envelope.
The borrower is not out of options once the notice lands. Section 22 lets the mortgagor pay the amount due plus the expenses the lender necessarily incurred at any time before the sale, and the mortgagor is then relieved from the consequences of the default. The same section lets the mortgagor demand a written statement of the arrears, and the lender has fifteen days to answer. A lender that fails to answer without reasonable excuse, or answers incompletely or incorrectly, has its enforcement rights suspended until it complies.
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The court's absence is not an oversight. It is how the Act is built. Section 35 says a statutory declaration as to default, a statutory declaration proving service, and a statutory declaration that the sale complies with the Act together amount to conclusive evidence of compliance and are sufficient to give good title to the purchaser. Section 36 goes further: where notice was given in professed compliance with the Act, the purchaser's title cannot be impeached on the ground that the default or notice rules were not followed, and anyone harmed has a remedy against the person who exercised the power of sale instead.
So the sale itself looks like an ordinary transaction. Section 24 allows a sale by public auction or by private contract, and lenders in practice list on MLS and sign a normal agreement of purchase and sale with a schedule attached. Section 25 adds that a receipt for the purchase money is a sufficient discharge, and the buyer is not bound to see to how that money is applied. A judge appears in one place only, under section 39, where a lender can apply without notice for leave to sell without giving notice at all.
A lender selling under power of sale is not entitled to keep whatever the property fetches. Section 27 sets the order in which the money arising from the sale must be applied.
Whatever is left is the residue, and section 27 directs it to the mortgagor. The one carve-out is section 27.1, where forfeited corporate real property within the meaning of the Forfeited Corporate Property Act, 2015 sends the residue to the Crown instead. A surplus is the borrower's money.
Section 28 defines exactly what a buyer gets: the person exercising the power of sale can convey the estate and interest of the mortgagor, and only what the mortgagor had power to dispose of. The lender is selling someone else's home in its actual state of title.
None of that makes a power of sale property a bad buy, but it does move the work onto the buyer. Budget for an inspection, a title search, a status certificate where the property is a condominium, and a lawyer who has closed power of sale deals before.
British Columbia does not do any of this out of court. Rule 21-7 (1) of the Supreme Court Civil Rules requires a foreclosure to be started by petition. Under Rule 21-7 (5), the court fixes the redemption period, determines what is due, and may order a sale of the mortgaged property, and section 15 of the Law and Equity Act lets it direct that sale on the terms it considers just. Under Rule 21-7 (9) the person with conduct of the sale applies to the court for an order confirming the sale, directing the disposition of the proceeds, and vesting title in the purchaser.
That last rule is the one that surprises people. In British Columbia an accepted offer goes to a judge for approval, and competing bids can show up in the courtroom on the approval date. In Ontario an accepted offer under a power of sale is binding when it is signed, with no approval date and no sealed bids. Our guide to the BC foreclosure process walks through the court side in detail.
If you are shopping in Ontario, treat a power of sale listing as a title and condition problem first and a price problem second. You can search active Ontario listings on Zealty. Ontario listing data on Zealty comes from the CREA Data Distribution Facility (DDF) feed, and it is limited to what that feed covers, which is active listings rather than sold history.
This article is educational and is not legal advice. Confirm your own situation with a lawyer before you sign anything on a power of sale property.
NOTE: This representation is based in whole or in part on data generated by Greater Vancouver REALTORS®, Fraser Valley Real Estate Board, Chilliwack and District Real Estate Board, or The Canadian Real Estate Association which assume no responsibility for its accuracy. This information is deemed reliable but is not guaranteed accurate by these organizations or by the agent or brokerage hosting this website. Data presented here is under the license agreement of Holywell Properties, a British Columbia Brokerage.
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