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JunPower of Sale in Ontario: The Lender’s Process and Your Options
When a homeowner in Ontario falls behind on a mortgage, the lender’s most common remedy is not foreclosure — it is power of sale. Power of sale is faster, cleaner, and more lender-friendly than foreclosure, which is why almost every default in Ontario goes this route. For the borrower, it is also one of the most consequential legal processes they will ever face, and the timing of decisions inside the process determines whether the borrower walks away with equity, walks away with nothing, or stops the process before it completes.
This guide explains how power of sale actually works in Ontario in 2026 under the Mortgages Act, what the borrower’s rights and options are at each stage, the difference between power of sale and foreclosure, and when to call a lawyer.
What power of sale actually is
Power of sale is a remedy that lets a mortgage lender sell the mortgaged property when the borrower is in default, apply the sale proceeds to the mortgage debt, and pay any surplus to the borrower (and any subsequent encumbrancers). The power exists either in the mortgage document itself (“contractual” power of sale) or under sections 31 to 43 of the Mortgages Act (“statutory” power of sale). Almost every modern Ontario mortgage uses contractual power of sale supplemented by the statutory rules.
The defining feature of power of sale, compared to foreclosure, is that the property is sold to a third party rather than transferred to the lender. The lender gets paid out of the proceeds; the borrower’s interest is extinguished; any surplus goes to the borrower. If the sale doesn’t cover the debt, the borrower is still on the hook for the shortfall — power of sale does not extinguish a personal covenant under the mortgage.
The Notice of Sale and the 35-day clock
Power of sale begins with a Notice of Sale under Mortgages Act section 31. The notice is given by the lender to the borrower, to any guarantor, to any subsequent encumbrancer, and to any other person whose interest is registered on title. The notice has to state the amount of the default, the amount required to cure the default, and the date after which the lender intends to sell.
The key number is 35 days. After serving the Notice of Sale, the lender must wait at least 35 days before it can take any further step to sell — this is the borrower’s redemption period. During those 35 days, the borrower can pay the full amount in default (plus the lender’s costs to date) and stop the process. Cure the arrears, and the mortgage goes back to performing.
If the default is not cured within 35 days, the lender can move to sell. In practice, lenders move quickly: they list the property, accept offers, and close to a third-party purchaser. The proceeds are distributed under the Mortgages Act priority rules.
The borrower’s redemption right
Even after the 35-day notice period expires, the borrower’s right to redeem the mortgage — to pay the full balance and stop the sale — continues until a binding sale closes. The longer the process runs, the more it costs to redeem (interest, legal fees, listing costs, real-estate commissions), but the right exists.
Borrowers with equity in the home and a way to access cash — a refinance through a private lender, an HELOC, family money, the sale of another asset — can stop a power of sale even after 35 days, provided they move before a third-party sale closes. Borrowers without equity have a harder route, but the right exists.
A borrower who is going to lose the home anyway is almost always better off selling it themselves before the lender does. A homeowner-controlled sale typically achieves a higher price than a power-of-sale listing, which the market discounts for distress. A real estate lawyer can structure a borrower-controlled sale with the lender’s cooperation — the lender usually agrees, because it gets paid out faster and recovers more.
Where the money goes
When a power-of-sale property sells, the proceeds are distributed in a specific order under section 27 of the Mortgages Act:
- The lender’s costs of sale — legal fees, real-estate commission, registration costs.
- Prior charges — any mortgage or charge registered ahead of the selling lender.
- The selling lender’s debt — principal, interest, NSF charges, and other contractual amounts.
- Subsequent charges — second mortgages, third mortgages, registered liens, judgments, in order of priority.
- The borrower — any surplus.
If the sale price doesn’t cover the lender’s debt, the lender can sue the borrower personally for the shortfall under the mortgage’s personal covenant. Many Ontario power-of-sale lenders pursue shortfall claims aggressively. Some don’t — particularly major banks where the loan is insured by CMHC, Sagen, or Canada Guaranty — but the personal liability exists.
Foreclosure vs power of sale
Foreclosure is the older remedy, available under the Mortgages Act and the Land Titles Act. In a foreclosure, the lender goes to court and gets an order transferring title to the lender. The property doesn’t get sold to a third party; the lender keeps it. Foreclosure takes longer, costs more, and forfeits the lender’s right to chase the borrower for any shortfall — once the lender takes the property, the lender has elected its remedy.
Power of sale is faster and preserves the lender’s shortfall claim, which is why Ontario lenders almost always use it. A borrower facing default will see foreclosure proceedings only in unusual circumstances.
Bona-fide-purchaser problem and lender’s duty of care
A power-of-sale purchaser buys clean title — the borrower’s equity of redemption is extinguished by the sale, and the purchaser is protected by section 35 of the Mortgages Act. The borrower’s recourse, after a power-of-sale closing, is against the lender, not against the purchaser.
The lender has a duty under the Mortgages Act and the common law to act in good faith and take reasonable steps to obtain a fair market price. In practice, this means proper marketing exposure (typically MLS), a reasonable listing period, and acceptance of a market-supported offer. A lender that sells at a fire-sale price to a related party, or that fails to expose the property to the market, can be sued by the borrower or subsequent encumbrancers for the difference between what it got and what it should have got. These claims are real but hard to win without strong evidence of bad faith or negligence.
What the borrower should actually do — and when
The single most important thing for a borrower in default is to stop hoping the problem will go away and start working with a lawyer the day the Notice of Sale arrives. The 35-day clock is the only meaningful window where the cheapest options — cure the arrears, negotiate a forbearance, refinance privately, list voluntarily — are all still on the table. Wait until day 30, and most of those options are gone.
A lawyer working on a power-of-sale file typically:
- Verifies the Notice of Sale is properly drafted, served on the right people, and respects the 35-day rule.
- Reviews the mortgage to confirm default and check for procedural challenges.
- Negotiates with the lender for a forbearance agreement — extending the deadline, sometimes reducing the amount required to cure.
- Coordinates a refinance through a private lender (slower, but possible in many cases).
- If sale is inevitable, helps the borrower run a voluntary sale ahead of the lender, with the lender’s cooperation.
- Pursues claims against the lender after closing where the sale process was deficient.
How a Brampton real estate lawyer fits in
Power of sale is one of the few areas of law where doing nothing for two weeks can cost a homeowner the entire value of their home. If you have received a Notice of Sale, are in arrears on your mortgage, or are worried that you might be, book a free consultation with GS Arora Law today — every day inside the 35-day window matters.
This article is general legal information about Ontario real estate law in 2026 and is not legal advice. For advice on your specific situation, speak with a lawyer.
GS Arora, Lawyer & Notary Public. Brampton, Ontario.