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Get My Free Estimate →Ontario lenders overwhelmingly use power of sale, not foreclosure. Where the mortgage contains its own power of sale clause, s. 32 of the Mortgages Act requires the default to continue at least 15 days before notice may be given, and no sale for at least 35 days after that notice. Where the mortgage has no such clause, s. 24 supplies one after three months and s. 26 requires 45 days notice. The borrower may cure at any time before sale under s. 22(1), “despite any agreement to the contrary”, by paying the arrears and the lender’s necessary expenses. Under s. 22(3) a lender that fails to answer a written request for a statement of arrears within 15 days has its enforcement rights suspended. Proceeds follow a five-tier waterfall in s. 27 and any residue is paid to the mortgagor. Existing tenancies survive: s. 47(1) deems whoever takes title by power of sale to be the landlord.
Ontario almost never forecloses. It sells. The two are different remedies with different clocks, different consequences and different paperwork, and the word people use — “foreclosure” — is usually the wrong one.
This page sets out the actual statutory machinery, quoted from the Mortgages Act, for three different readers: the owner who has missed payments, the buyer looking at a power of sale listing, and the tenant living in a building that is about to change hands. Their positions are not the same and most explainers only address the first.
If you are behind on payments right now, the two most useful things on this page are s. 22(1) — your right to cure the default and be relieved of its consequences, which the Act protects “despite any agreement to the contrary” — and s. 22(3), which suspends the lender’s enforcement rights if it fails to answer your written request for a statement of arrears within fifteen days. Both are below. Talk to a lawyer, and talk to your lender, before the clock runs.
Power of sale and foreclosure are not the same thing
| Power of sale | Foreclosure | |
|---|---|---|
| What it is | The lender sells the property, applies the proceeds, and accounts for the rest | A court action in which the lender asks to take title outright |
| Court involved? | No, for a contractual power of sale. It runs on notice and a clock | Yes. Rules of Civil Procedure, Rule 64 |
| Who ends up owning it | A third-party buyer | The lender |
| Speed | Weeks, on the statutory minimums | Months, with a full slate of judgments and a final order |
| Can the borrower derail it? | Only by curing the default or redeeming | Yes — any defendant can convert the action from foreclosure to sale. The Ontario court forms provide for exactly that (Forms 64G, 64H and 64I are headed “Action Converted from Foreclosure to Sale”) |
| What happens to a surplus | Paid out under the s. 27 waterfall, residue to the mortgagor | On a completed foreclosure there is no accounting to the borrower — the lender takes the property |
That last row is why lenders overwhelmingly choose power of sale. A power of sale is extra-judicial, runs on a fifteen-day and thirty-five-day clock, and hands the buyer a title the Act protects. Foreclosure requires a court action the borrower can convert into a sale anyway.
You will also read that foreclosure extinguishes the lender’s right to sue on the personal covenant while power of sale does not, and that this is the real reason lenders avoid foreclosure. That is the conventional understanding and I believe it is right — but I could not source it to a statute or a judgment I read myself, so I am not going to state it as verified law. Ask your lawyer. The structural reasons above are sourced, and they point the same way.
The clock: two different routes, two different notice periods
Which one applies depends on whether your mortgage contains its own power of sale clause. Almost every institutional Ontario mortgage does.
Route one: the contractual power of sale — s. 32
“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.”
Fifteen days of default, then notice, then thirty-five days. Those are floors, not ceilings — a lender may wait longer and often does, because it wants the arrears cured rather than the property. But it cannot go faster.
Route two: the statutory power of sale — ss. 24 and 26
Where the mortgage confers no express power of sale, s. 24 supplies one, exercisable after three months from default. Section 26 then sets the notice:
“No sale under the power conferred by section 24 shall be made until after forty-five days notice in writing in the form prescribed by the regulations made under this Act has been given to the persons and in the manner provided by Part III.” … “The notice may be given at any time after fifteen days default in making any payment provided for by the mortgage.”
Who has to be told
Section 31(1) is not a formality — a second mortgagee, a lien holder or an execution creditor who should have been served and was not has a real complaint. The mortgagee must give notice to every person appearing on the parcel register and the index of executions (Land Titles) or the abstract index and the sheriff’s writs index (Registry), other than persons whose interest ranks ahead of the mortgagee’s and persons subject to whose rights the mortgagee proposes to sell.
Section 31(2) fixes the search cut-off: the registers include instruments received for registration before 4:30 p.m. on the day immediately prior to the day notice is given. Register a minute later and you are not on the list.
The borrower’s two rights that lenders do not advertise
Section 22(1): you can cure, and no agreement can take that away
“Despite any agreement to the contrary, where default has occurred … and under the terms of the mortgage, by reason of such default, the whole principal and interest secured thereby has become due and payable, (a) at any time before sale under the mortgage; or (b) before the commencement of an action for the enforcement of the rights of the mortgagee … the mortgagor may perform such covenant or pay the amount due under the mortgage … and pay any expenses necessarily incurred by the mortgagee, and thereupon the mortgagor is relieved from the consequences of such default.”
Acceleration is not final. Up to the moment of sale you can pay the arrears plus the lender’s necessary expenses — not the whole accelerated balance — and the default is undone.
Section 22(2) and (3): demand the numbers in writing, and start a clock of your own
You may require the mortgagee, by written notice, to furnish a written statement of the amount in default or the nature of the default, and of any expenses it has necessarily incurred. Then:
“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.”
Read that again. A written request under s. 22(2) that goes unanswered, or is answered incompletely or incorrectly, suspends enforcement. It is one of the few provisions in the Act that puts a clock on the lender. Make the request in writing and keep proof of delivery.
Where the money goes
Section 27 sets a waterfall, and the current consolidation has five tiers — not the four you will find in older summaries working from the 1990 print. A rent-deposit tier was added in 2006.
| Order | Paid to |
|---|---|
| Firstly | All the expenses incident to the sale, or incurred in any attempted sale |
| Secondly | All interest and costs then due under the mortgage the sale was made under |
| Thirdly | All the principal money then due under that mortgage |
| Fourthly | Subsequent encumbrancers, according to their priorities |
| Fifthly | Tenants of the mortgagor, for rent deposits paid under s. 106 of the Residential Tenancies Act, 2006, where the deposit was not applied to the last rent period |
| Residue | The mortgagor. If the sale produces a surplus after all of the above, it is yours |
On a shortfall, the position is different and I want to be careful here. The conventional statement is that after a power of sale the borrower remains personally liable for any deficiency, and the lender can sue the borrower and any guarantor for it. I could not source that rule to a statute or a judgment I read myself — my source is a law firm bulletin. It is very likely correct. It is not something I will state as verified. If you are facing a shortfall, that question is worth a lawyer’s hour.
Buying a power of sale
The Act gives the buyer unusually strong title protection, and the seller gives the buyer unusually little else.
What the statute gives you
Section 36: the purchaser’s title “is not liable to be impeached on the ground that the provisions of this Part or, where applicable, Part II respecting default and the provisions of this Part respecting notice, have not been complied with, but any person damnified thereby has a remedy against the person exercising the power of sale.” If the lender botched the notice, that is the lender’s problem and the injured party sues the lender — your title stands. Section 35 makes statutory declarations as to default and service conclusive evidence for your title, and s. 25 says a purchaser “is not bound to see to the application of the purchase money.”
What the seller does not give you
The property is sold as is, where is. The lender never lived there, knows nothing about it, and strikes the standard representations and warranties out of the agreement. There is generally no seller property information statement, no warranty that anything works, and often restricted access before closing. The entire burden of due diligence moves to you.
Is a power of sale actually cheaper? There is no verifiable data, and I looked. No published dataset from CMHC, Teranet, TRREB or Statistics Canada compares power-of-sale sale prices against market. Anyone quoting you a discount percentage is quoting a feeling. There is also a legal reason to doubt the premise: a selling mortgagee owes a duty to act in good faith and take reasonable steps to obtain fair market value. A lender that dumps a property below market is exposed to the borrower, whose surplus it just destroyed.
If you are a tenant in the building
This is the part almost nobody writes about, and the answer is better than tenants expect. Section 47(1):
“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.”
The tenancy does not evaporate. Whoever ends up holding the property steps into the landlord’s shoes, with the landlord’s obligations — maintenance, vital services, and exposure to rent abatement orders. The Landlord and Tenant Board says the same thing in Interpretation Guideline 21.
And the order of registration does not matter. Section 46(3) applies this Part and s. 27 to “mortgages, whether registered before or after the tenancy agreement was entered into”. A tenancy signed after the mortgage was registered is still caught.
The practical consequence for a buyer: on a tenanted power of sale you should expect to inherit the tenants. A mortgagee selling under power of sale is generally not going to run an eviction for you, and the ordinary Residential Tenancies Act rules govern what you can and cannot do afterwards.
What help actually exists, and where it stops
Ontario’s financial regulator publishes no consumer guidance specific to power of sale. I checked the whole of FSRA’s mortgage brokering guidance library and there is nothing on borrower default. The protections that do exist are federal, and they are softer than they sound.
| Instrument | What it does | The catch |
|---|---|---|
| FCAC Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, effective 5 July 2023 | Sets out what FCAC expects banks to consider for consumers at risk: waiving prepayment penalties, waiving internal fees and costs, not charging interest on interest, extending amortisation for the shortest period possible | A guideline, addressed to institutions, not a right you can enforce |
| Canadian Mortgage Charter | Six commitments including temporary amortisation extension, waived fees on relief measures, proactive lender contact four to six months before renewal, and lump-sum payment or sale without prepayment penalties for homeowners at risk | FCAC states plainly that the Charter is not established in legislation. It is voluntary |
| FCAC mortgage relief measures | Payment deferral, extended deferral, amortisation extension, special payment arrangements, capitalisation of late payments, interest-only payments, sale-by-borrower plans | Expected of federally regulated institutions |
None of it reaches a private lender or a mortgage investment corporation. That matters here. Second mortgages in west Toronto are frequently private, and a private lender is under no FCAC expectation at all — only the Mortgages Act clock and whatever your mortgage document says. If your second is private, assume the minimum statutory protection and nothing more.
For scale: the Canadian Bankers Association reports a national arrears rate of 0.28 per cent on mortgages ninety or more days in arrears as at June 2026, and that more than 99 per cent of mortgage holders at a bank in Canada are not considered seriously delinquent. Default is rare. It is also not zero, and the people it happens to deserve a page that tells them what the statute actually says.
Seven things people get wrong
| The belief | What the Mortgages Act says |
|---|---|
| “The bank is foreclosing on me.” | Almost certainly not. Foreclosure is a Rule 64 court action ending in the lender taking title. What is happening is a power of sale under ss. 31 and 32. |
| “Once they accelerate, it is over.” | Section 22(1) lets you cure at any time before sale, despite any agreement to the contrary, by paying the arrears and the lender’s necessary expenses — not the whole balance. |
| “They can sell whenever they want.” | Section 32: no notice until fifteen days of default, and no sale for at least thirty-five days after notice. Section 26 sets forty-five days on the statutory route. |
| “The lender keeps whatever it sells for.” | Section 27 is a five-tier waterfall and “the residue shall be paid to the mortgagor”. A surplus is yours. |
| “My tenancy ends when the building sells.” | Section 47(1) deems the mortgagee in possession, or whoever takes title by power of sale, to be the landlord under the existing tenancy agreement. |
| “My tenancy is safe because I signed after the mortgage.” / “It is void because I signed after.” | Section 46(3) applies the Part to mortgages whether registered before or after the tenancy agreement was entered into. |
| “Power of sale properties are a bargain.” | No verifiable Ontario dataset supports a discount, and the selling mortgagee owes a duty to obtain fair market value. What is different is the risk transfer, not the price. |
Looking at a power of sale listing in Etobicoke, or facing one on your own property?
If you are buying, I will tell you what the schedule actually strips out and what due diligence has to replace it. If you are the owner, the first call should be a lawyer and your lender, not a Realtor — but if a sale is the right answer, selling it yourself before the lender does almost always produces a better number and protects your surplus. No obligation and no cost to talk it through.
connect@jatindua.com · 437-987-1925 · Book a free consultation
Confidential. Read personally and answered within 24 hours. I never share, sell or distribute your information.
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Frequently asked questions
Is power of sale the same as foreclosure?
No. Power of sale is an extra-judicial remedy in which the lender sells the property and accounts for the proceeds under s. 27 of the Mortgages Act, with any residue paid to the mortgagor. Foreclosure is a court action under Rule 64 of the Rules of Civil Procedure in which the lender seeks title to the property itself. Ontario lenders overwhelmingly use power of sale, partly because a defendant can convert a foreclosure action into a sale — the Ontario court forms expressly provide for that.
How long does the lender have to wait before selling?
Where the mortgage confers its own power of sale, s. 32 requires that the default have continued for at least fifteen days before notice of exercising the power of sale may be given, and that no sale be made for at least thirty-five days after the notice. Where there is no express power in the mortgage, the statutory power under s. 24 arises three months after default and s. 26 requires forty-five days written notice, which may be given any time after fifteen days of default. These are minimums, not deadlines the lender must meet.
Can I stop a power of sale after the lender has accelerated the loan?
Section 22(1) says that despite any agreement to the contrary, at any time before sale under the mortgage or before an enforcement action is commenced, the mortgagor may pay the amount due plus any expenses necessarily incurred by the mortgagee, and is then relieved from the consequences of the default. Importantly this is the arrears and expenses, not the whole accelerated principal. Get the exact figure in writing under s. 22(2).
What happens if the property sells for more than I owe?
The surplus is yours. Section 27 applies the sale proceeds in five tiers — sale expenses, then interest and costs, then principal, then subsequent encumbrancers by priority, then tenants for rent deposits paid under s. 106 of the Residential Tenancies Act that were not applied to the last rent period — and then states that the residue shall be paid to the mortgagor. Note that older summaries describe four tiers; the rent-deposit tier was added in 2006 and appears in the current consolidation.
What if the property sells for less than I owe?
The conventional position is that the borrower remains personally liable for the shortfall and the lender may sue the borrower and any guarantor for it. I have flagged this on the page because I could not verify that rule against a statute or a judgment I read myself — my source is a law firm bulletin. If you are facing a deficiency, get legal advice on it specifically rather than relying on any web page including this one.
Are power of sale properties cheaper than market?
There is no verifiable Ontario dataset comparing power-of-sale sale prices against market prices. I looked for one across CMHC, Teranet, TRREB and Statistics Canada and found nothing. There is also a legal reason to be sceptical of the premise: a mortgagee exercising power of sale owes a duty to act in good faith and take reasonable steps to obtain fair market value, and a lender that sells too cheaply is answerable to the borrower whose surplus it destroyed. What genuinely differs is the risk allocation, not necessarily the price.
What am I giving up when I buy a power of sale?
Representations and warranties, mostly. The lender never occupied the property, has no knowledge of its condition, and strikes the standard representations out of the agreement, so the property comes as is, where is and the entire burden of due diligence falls on you. What you gain is unusually strong title protection: under s. 36 the purchaser’s title is not liable to be impeached on the ground that the default and notice provisions were not complied with, and s. 35 makes statutory declarations as to default and service conclusive evidence for the purchaser’s title.
I rent a unit in a building going through power of sale. Do I have to move?
No. Section 47(1) of the Mortgages Act deems a person who becomes mortgagee in possession, or who obtains title by foreclosure or power of sale, to be the landlord under the existing tenancy agreement. The Landlord and Tenant Board confirms this in Interpretation Guideline 21. Your tenancy continues and the new owner inherits the landlord’s obligations. Section 46(3) applies the Part to mortgages whether registered before or after the tenancy agreement was entered into, so the order does not change the answer.
Does a second mortgagee get notice?
Yes, as of right. Section 31(1) requires notice to every person appearing on the parcel register and index of executions, or the abstract index and sheriff’s writs index, other than those ranking ahead of the selling mortgagee and those subject to whose rights it proposes to sell. Section 31(2) sets the cut-off at instruments received for registration before 4:30 p.m. on the day immediately before notice is given. A second mortgagee also has its own power of sale and can serve its own notice.
Related reading
- Mortgage renewal difficulty in Ontario: the options before default
- Selling an inherited property in Ontario as estate trustee
- The real cost of buying and selling a home in the GTA
- Condo insurance in Ontario: the standard unit and the deductible chargeback
Sources
Every figure on this page traces to one of these, and each was read on 30 August 2026. Primary sources only — statute, regulation, and the government or agency that administers the rule. Where I could not verify something from a primary source, the page says so instead of guessing.
- Mortgages Act, R.S.O. 1990, c. M.40 — e-Laws consolidation. Official Ontario consolidation. Sections 22, 24, 26, 27, 31, 32, 35, 36, 46 and 47 each read in full on 30 August 2026. Note that s. 27 in the current consolidation contains five tiers, not the four in the 1990 print — a rent-deposit tier was added by 2006, c. 17, s. 252 (1). Accessed 30 August 2026.
- Interpretation Guideline 21: Landlords, Tenants, Occupants and Residential Tenancies. Landlord and Tenant Board, Tribunals Ontario. Updated 8 March 2022. Confirms that by virtue of the Mortgages Act a mortgagee in possession of a mortgaged residential complex is deemed to be a landlord under a tenancy agreement. Accessed 30 August 2026.
- Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances. Financial Consumer Agency of Canada. Published and effective 5 July 2023. Sets out what FCAC expects federally regulated financial institutions to consider for consumers at risk, including waiving prepayment penalties and internal fees, not charging interest on interest, and extending amortisation for the shortest period possible. Accessed 30 August 2026.
- Canadian Mortgage Charter. Financial Consumer Agency of Canada briefing page, date modified 9 September 2025. Six commitments. FCAC states the Charter is not established in legislation. Accessed 30 August 2026.
- Mortgage relief measures. Financial Consumer Agency of Canada, date modified 15 October 2025. Lists payment deferral, amortisation extension, special payment arrangements, capitalisation of late payments and interest-only payments as measures federally regulated institutions are expected to offer. Accessed 30 August 2026.
- Mortgages in arrears. Canadian Bankers Association. Reports a national arrears rate of 0.28 per cent on mortgages 90 or more days in arrears as at June 2026, and that more than 99 per cent of mortgage holders at a bank in Canada are not considered seriously delinquent. Accessed 30 August 2026.
- Residential Tenancies Act, 2006, S.O. 2006, c. 17 — e-Laws consolidation. Official consolidation. Consolidation period stated on the document: from July 1, 2026. Last amendment: 2025, c. 14, Sched. 12. Accessed 30 August 2026.
About the author — Jatin Dua, Etobicoke real estate agent
I’m the Broker of Record at RE/MAX Quantum Realty, 799 The Queensway in Etobicoke. I write these pages the same way I work a file: read the primary source, quote it, date it, and say plainly where the source is silent or where two sources disagree. If a figure on this page has no citation beside it, that is a mistake and I want to hear about it.
I work with buyers, sellers, renters and investors across Etobicoke, Mimico, Humber Bay Shores, New Toronto, Long Branch, Alderwood and Stonegate–Queensway. connect@jatindua.com or 437-987-1925.