What is it?
Power of sale is the process a lender (the mortgagee) uses to sell a home and recover the loan when the owner stops paying the mortgage (a loan secured by the home). Ontario’s Mortgages Act sets the notices and waiting periods.
It is not a court case. The lender gives the required notice, waits the required time, and then sells the home, usually on the open market through a real estate agent. The lender does not become the owner. After the debt and costs are paid from the sale, any money left over goes back to the owner (the mortgagor).
Mortgage contracts normally contain a power of sale clause. Even without one, section 24 of the Mortgages Act gives the lender a statutory power of sale after three months of default.
Step by step
- The borrower falls behind. Under section 32 of the Mortgages Act, the lender cannot send the notice of exercising the power of sale (often called a “Notice of Sale”) until the default has lasted at least 15 days.
- The notice goes, in the prescribed form, to everyone shown in the parcel register and the index of executions as having an interest in the property (section 31). That includes second mortgage lenders, judgment creditors and lien claimants. If the home is a matrimonial home, the spouse who is not on title is also entitled to notice (Family Law Act, section 22).
- No sale can happen for at least 35 days after the notice is given (section 32). If the mortgage sets a longer period, the longer period applies (section 37).
- During this time the owner can stop the process by paying the arrears and the lender’s costs (section 22). If the notice demands the full amount owing and the owner pays it as the notice requires, the lender must accept the payment (section 43).
- If the arrears are not paid, the lender sells the home, usually by listing it on the MLS through an agent and taking offers like any other sale.
- The sale money is split in the order set by section 27 (see the table). Whatever is left goes back to the owner.
How is the sale money divided?
Section 27 of the Mortgages Act sets the order.
| Order | Paid to |
|---|---|
| 1 | The costs of the sale (including any failed attempt to sell) |
| 2 | Interest and costs owing on that mortgage |
| 3 | The principal owing on that mortgage |
| 4 | Later lenders (such as a second mortgage), in order of priority |
| 5 | Tenants, for rent deposits that were not used for the last rent period |
| The rest | The owner (the borrower) |
If the sale brings in less than the debt, nothing is left over and the owner may still owe the shortfall. Confirm your exact liability in the mortgage contract and with a lawyer.
How is it different from foreclosure?
| Power of sale | Foreclosure | |
|---|---|---|
| Who sells | The lender sells on the market after notice; the owner stays the owner until the sale closes | The lender takes ownership of the home itself through a court process |
| Money left over | Goes to the owner after the debt and costs | The lender keeps the home, so the owner gets nothing back |
| Court | Normally not needed (only the notices and waiting periods) | A court judgment is needed |
| In Ontario | Generally far more common | Rare |
The Mortgages Act recognizes both (section 47 refers to “foreclosure or power of sale”). Check which one you are facing with the notice and a lawyer.
Buying a power-of-sale home
- The seller is the lender, not the owner. The lender has never lived in the home and knows little about it. The sale is usually “as is, where is”, with no warranties about the condition and no seller property information statement (SPIS).
- A home inspection matters even more than usual. Include an inspection condition if you can; if not, inspect before you make the offer.
- The agreement normally comes with the lender’s own schedule. A common clause lets the lender cancel the deal if the owner pays all the arrears before closing (the owner’s right under section 22 of the Mortgages Act). That means your deal can fall through, so read the schedule carefully with your lawyer.
- Appliances and furniture (chattels) belong to the owner and may not be included, and a vacant home may not have been maintained.
- The price is not always a bargain. The lender must return any surplus to the owner, so it normally tries to sell close to market value.
- Title is fairly safe. Section 35 of the Act says the lender’s statutory declarations about the default, the notice and compliance give the buyer good title, and section 36 says the buyer’s title cannot be attacked for defects in the notice procedure. Still get a title search and title insurance.
- If tenants live there, the lender (and then the buyer) steps into the landlord’s shoes (section 47). A tenant can only be removed under the Residential Tenancies Act (section 48).
If you are the owner
- Contact a lawyer and your lender as soon as you get the notice. Under section 22 of the Mortgages Act you can cure the default any time before the sale by paying the arrears, the interest owing and the lender’s necessary costs. You do not have to repay the whole principal early.
- You can demand a written statement of the arrears (section 22(2)). The lender must answer within 15 days, and if it does not, or answers incorrectly, its enforcement rights are suspended until it does (section 22(3)).
- During the 35 days you can also sell the home yourself, refinance with another lender, or negotiate a repayment plan. The lender’s sale costs are taken out of the sale money first (section 27), so ask a lawyer whether selling it yourself would leave you more.
- Until the deadline in the notice has passed, the lender cannot start other proceedings without a court order (section 42).
- If the home is sold, you are entitled to what is left after the debt and costs. Ask for the full accounting and check it.
Example
A Brampton homeowner has missed three mortgage payments. After the default has lasted 15 days, the lender sends a notice of sale by registered mail. The notice sets out the arrears, the costs and the date by which they must be paid.
When nothing is paid 35 days after the notice, the lender lists the home through an agent. A buyer reviews the “as is” terms and the lender’s schedule with their lawyer and has the home inspected before offering. After closing, the lender applies the money to the sale costs, interest, principal and the second mortgage, in that order, and sends the balance to the former owner.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
Where a mortgage by its terms confers a power of sale upon a certain default, notice of exercising the power of sale shall not be given until the default has continued for at least fifteen days, and the sale shall not be made for at least thirty-five days after the notice has been given.In plain wordsThe lender may send the notice only after at least 15 days of default, and may not sell until at least 35 days after the notice.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
A mortgagee shall not exercise a power of sale unless a notice of exercising the power of sale in the form prescribed by the regulations made under this Act has been given by the mortgagee to the following persons, … 1. Where the mortgaged property is registered under the Land Titles Act, to every person appearing by the parcel register and by the index of executions to have an interest in the mortgaged property.In plain wordsThe lender cannot sell unless it has sent the prescribed notice to everyone shown on title and in the executions index as having an interest in the property.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
Despite any agreement to the contrary, where default has occurred in making any payment of principal or interest due under a mortgage … the mortgagor may perform such covenant or pay the amount due under the mortgage, exclusive of the money not payable by reason merely of lapse of time, and pay any expenses necessarily incurred by the mortgagee, and thereupon the mortgagor is relieved from the consequences of such default.In plain wordsWhatever the mortgage says, the owner can pay the arrears and the lender’s necessary costs any time before the sale and be relieved of the default. They do not have to repay the whole principal early.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
The mortgagee shall answer a notice given under subsection (2) within fifteen days after receiving it, and, if without reasonable excuse the mortgagee fails so to do or if the answer is incomplete or incorrect, any rights that the mortgagee may have to enforce the mortgage shall be suspended until the mortgagee has complied with subsection (2).In plain wordsIf the owner asks in writing for a statement of the arrears, the lender must answer within 15 days. If it does not, or the answer is wrong, its enforcement rights are suspended until it does.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
The money arising from the sale shall be applied by the person receiving the same as follows: … Firstly, in payment of all the expenses incident to the sale or incurred in any attempted sale; … Secondly, in discharge of all interest and costs then due in respect of the mortgage under which the sale was made; … Thirdly, in discharge of all the principal money then due in respect of the mortgage; … and the residue shall be paid to the mortgagor.In plain wordsSale money goes first to the sale costs, then interest and costs, then principal, then later creditors and tenant rent deposits, and whatever remains goes to the owner.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
A person who becomes the mortgagee in possession of a mortgaged residential complex which is the subject of a tenancy agreement between the mortgagor and a tenant or who obtains title to the residential complex by foreclosure or power of sale shall be deemed to be the landlord under the tenancy agreement.In plain wordsWhoever takes over a rented home through power of sale or foreclosure becomes the landlord under the existing lease. The tenancy continues.
Source: ontario.ca/laws/statute/90m40 · checked Oct 30, 2026
Common questions
Are power-of-sale homes cheap?
Not necessarily. The lender must return any surplus to the owner, so it normally tries to get close to market value. Some sell for less because they are in poor shape or vacant, but they are sold “as is”, so you have to price the repairs yourself.
What if the original owner pays up after I sign?
Under section 22 of the Mortgages Act the owner can cure the default any time before the sale. The lender’s schedule usually lets it cancel your deal in that case. Whether you get your deposit back, or any costs you paid, depends on the schedule wording, so check it with your lawyer before you offer.
Is title safe when I buy from a lender?
Sections 35 and 36 of the Mortgages Act say the lender’s statutory declarations give the buyer good title and that the title cannot be attacked for defects in the notice procedure. Other liens or executions may still exist, so get a title search and title insurance.
I got a notice. How much do I have to pay to stop it?
Before the sale, you pay the arrears, the interest owing and the lender’s necessary costs (section 22), not the whole principal. If you ask in writing for a statement of arrears, the lender must answer within 15 days.
Does a spouse who is not on title get the notice?
If the home is a married couple’s matrimonial home, section 22 of the Family Law Act gives the spouse who is not on title the same notice and the same right to pay the arrears and keep the home.
Can I evict the tenants if I buy a rented power-of-sale home?
Section 47 of the Mortgages Act continues the tenancy, and the new owner becomes the landlord. Ending it requires the Residential Tenancies Act process (for example, an N12 notice for your own use).
Guides that use this term
Sources checked
- Mortgages Act, R.S.O. 1990, c. M.40 (e-Laws) — ss. 22, 24, 26, 27, 31–37, 42, 43, 47, 48 · checked Oct 30, 2026
- Family Law Act, R.S.O. 1990, c. F.3 (e-Laws) — s. 22 · checked Oct 30, 2026