A notice of sale is a serious step, but it is not the end of the road for an owner, and it is not a shortcut for a lender. It starts a timetable set by Ontario’s Mortgages Act and by the mortgage itself.
What a notice of sale is
Most Ontario mortgages contain a power of sale: the lender’s right to sell the property without going to court if the borrower defaults. Where a mortgage does not, the Act generally supplies one. Either way, the lender cannot sell until it has given a notice of sale, in the prescribed form, to everyone the Act requires, whatever the mortgage says.
The timeline
Under a power of sale in the mortgage:
- Default comes first. The notice cannot be given until the default has continued for at least 15 days.
- Then the notice period. The sale cannot be made until at least 35 days after the notice is given.
- Longer periods in the mortgage still count. If the mortgage gives the borrower more time than the Act, the borrower gets the longer period.
Where the lender relies on the statutory power of sale instead, the power arises only after three months of default, and the notice period is 45 days.
A notice sent by registered mail must be mailed in Ontario and counts as given on the day it is mailed.
Who must receive the notice
The lender must give notice to everyone who appears from the title register and the execution records to have an interest ranking after its mortgage: usually the owner, later mortgagees and creditors with registered judgments. It must also notify a public authority with a statutory lien the lender has written notice of, and anyone else whose interest it knew of in writing before giving the notice.
What the owner can still do
- Ask for a statement. The owner can require the lender, in writing, to state the amount in default and its expenses. The lender must answer within 15 days. If it fails to answer without reasonable excuse, or its answer is incomplete or incorrect, its enforcement rights are suspended until it complies.
- Put the mortgage back into good standing. At any time before sale, the owner can pay the arrears (or fix another default) plus the expenses the lender necessarily incurred, even if the mortgage says the whole balance became due on default. This does not cover amounts owing only because the term has ended. Once a mortgage has matured, the full balance is due.
- Pay it off. The owner can redeem the mortgage in full, for example through a refinancing or a private sale. Where the notice demands the full amount, the lender must accept payment made as the notice requires.
- Question the charges. If there is a dispute about the lender’s costs, they can be reviewed (assessed) by a court assessment officer.
- Negotiate. Many matters resolve with a written payment agreement or time to complete a sale.
The main limit is timing. These rights generally end once the lender signs a binding agreement to sell, not when that sale closes. A court can stop a sale in some cases, for example where the notice was defective, but after a buyer completes, the buyer’s title is generally protected and the owner’s remedy is usually damages against the lender.
During and after the notice period
While the notice period runs, the lender cannot start a lawsuit or take further enforcement steps without a judge’s permission, except to stop waste or damage to the property. Once it expires without a cure, the lender can take possession and sell. If the owner is still living in the home and does not leave, the lender generally needs a court order, enforced by the sheriff. Tenants have separate protection: a lender can obtain possession of a tenant’s unit only in accordance with the Residential Tenancies Act, 2006, and a lender in possession is treated as the tenant’s landlord.
How the sale must be run
A lender selling under a power of sale must act in good faith and take reasonable precautions to obtain the true market value of the property at the time of sale. In practice that means a realistic valuation, proper marketing, and a genuine arm’s length sale. If the lender falls short, the owner may claim damages for an improvident sale.
The Act sets the order for the proceeds: the expenses of the sale, then interest, costs and principal on the mortgage being enforced, then later encumbrancers by priority, then certain tenant rent deposits. The rest goes to the owner. If the sale does not cover the debt, the borrower usually remains personally liable for the shortfall.
Power of sale, foreclosure and judicial sale
- Power of sale happens out of court and is the route most Ontario lenders use.
- Foreclosure is a court action in which the lender asks to become the owner. The owner can ask for time to redeem, or ask for a sale instead.
- Judicial sale is a court action in which the property is sold under the court’s supervision, and the lender can claim any shortfall in the same action.
If you are the lender
Most challenges to a power of sale come down to a handful of steps. Confirm the default and waiting periods before giving notice. Use the prescribed form, state the amounts accurately, serve everyone required and keep proof of service. Answer any request for a statement within 15 days. Get a proper valuation, market the property genuinely, keep a record of offers, and sell at arm’s length. Then account for the proceeds promptly and in the statutory order.