When a mortgage goes into default in Ontario, power of sale is the most common way lenders recover what they are owed. It is faster and more flexible than foreclosure, but it comes with strict obligations — and real risks for buyers who do not do their homework.
What it is
Power of sale lets a lender sell a mortgaged property after default in order to repay the debt, without taking ownership of the property itself. The lender's authority comes from the terms of the mortgage and Ontario's Mortgages Act.
How the process works
After a borrower defaults, the lender must give a statutory Notice of Sale and allow a redemption period before proceeding. During that window, the borrower can usually stop the process by bringing the mortgage back into good standing or paying it out. If the default is not cured, the lender may sell the property. Critically, the lender owes a duty to act in good faith and to take reasonable steps to obtain fair market value — it cannot simply dump the property to recover the loan balance.
Where the money goes
Sale proceeds are applied in order: the costs of enforcement and sale, then the lender's mortgage, then any subsequent mortgages or encumbrances by priority, with any surplus returning to the borrower. Getting that priority analysis right — including writs and executions registered against the borrower — is often where these matters succeed or go sideways.
For buyers of power of sale properties
These homes are typically sold as is, where is, with little or no warranty from the lender about condition. There may be other mortgages, unpaid taxes, or construction liens on title, each with its own priority, and possession is not always straightforward. A buyer needs a lawyer reviewing title closely — not just at the start, but through to closing.
For lenders
Clean enforcement starts long before default: valid security, accurate documentation, proper notice, a good-faith sale process, and careful attention to priorities. When any of those is missing, a borrower's lawyer will find it.
Power of sale is a powerful remedy, but it is unforgiving of shortcuts. Whether you are a lender enforcing your security or a buyer eyeing an opportunity, the details on title decide the outcome.
This article is general information about Ontario real estate and mortgage law and is not legal advice. For advice on your situation, speak with a lawyer.