In Canada, there are two main ways a lender can recover a mortgage debt when a borrower defaults

Judicial sale or power of sale. Judicial sale is a sale conducted under the supervision and authority of the court, where a lender must apply to the court to get the court's permission to sell the property and lender keeps the equity. Power of sale allows a lender to sell property without the involvement of the court. The lender has the right to sell the property from the mortgage document and/or provincial  legislation which authorizes power if sale in that province.

In short, Power of Sale is a remedy to a mortgage default by the mortgagee (Bank or Lender), against the mortgagor (home owner). A default would be defined as a failure to fulfill a covenant or obligation. When a mortgage falls into default, the mortgagee often relies on the acceleration clause built into the mortgage contract, in which the full amount remaining on the mortgage becomes due and payable upon default.

When a default occurs, it is uncommon for the lender to seek legal action immediately. Lenders are in the business of lending, not owning houses. At this point, the lender will weigh practical considerations. In most cases the lender will be in personal contact with the mortgagor to reach a solution.

At a point when practical negotiations break down is when the lender will seek legal action. It is the legal right of a mortgagee to force the sale of a property without judicial proceedings, in the event of a default. In Canada Power of Sale is the most frequently used method by which a mortgagee remedies a default by a mortgagor.

Power of Sale procedure involves the recovery of money due, the unpaid interest and associated costs by requiring the sale of a real property when a debtor fails to make scheduled payments. Once a mortgage is in default for a predetermined amount of time, the lender can serve a legal notice of default to the debtor informing them of the amount due and what is required to eliminate the Mortgage Arrears.

A Power of Sale date is set if the delinquency is not cleared within the specified time period. The property may then be sold during a public sale or Auction.

The defaulting borrower has the opportunity to redeem the property up until the time of Power of Sale by paying the required delinquencies and costs. When the property is sold all mortgage arrears and associated costs to sell the property are deducted before any consideration is given to the home owner whose house was sold.

Here are some of the steps that will take place during the Power of Sale Process. The timelines may vary from Mortgagor to Mortgagor.

Notice of Default:

One can expect this will be sent out anywhere from 3 to 15 days following a default in the mortgage payment by the mortgagor.  This notice generally will request the borrower who is in default, to contact the lender to speak about resolving the missed mortgage payments.  In many cases, once the borrower is in default the lender will not accept any further payments towards the mortgage. Admin, legal, maintenance fees are in most cases charged on the default if immediate resolution is not made. These combined fees can add up at an expediential rate.

Notice of Sale:

A Notice of  Sale will be issued and forwarded to the owners and their spouse, the occupant and their spouse, all mortgagors and other mortgagees with an interest in the property. The Notice of Sale allows for a Redemption period. During this time, no further legal action will take place by the lender and the mortgagor has the option to bring the arrears up to date. The redemption period varies by lender.

Statement of Claim:

A Statement of Claim is a legal document filed with the courts. Once the Statement of Claim is issued, it is served on the property owner(s). Service could take approximately 1 to 2 weeks. Upon the Statement of Claim being served on the property owners, there is a 20 day waiting period by the courts in which the property owner can respond during that time. This time period may vary, it depends on whether the property owner was served personally or otherwise.

Default Judgment:

To proceed and obtain possession of the property, the mortgagee must obtain an order from the Courts granting the mortgagee default judgment. At this point, most lenders will also ask the Courts to issue an order granting the mortgagee possession of the property.  This process can take up to a month depending on how quickly the Courts are able to attend to the matter.

Vacant Possession / Eviction:

Once the lender has obtained an order for possession of the unit, they will asses whether the property is occupied or vacant. If vacant, an order will be given to change the locks.  If occupied further legal action will be taken to have the occupant evicted.

Note: The timelines can change depending on whether the property owner files a defense during Power of Sale Proceedings.

Our Goal is to put a solution in place for you as soon as you decide you want and or need help.

The quicker you contact our team, the sooner we can have real options for your to consider.

Unfortunately, many families lose their home every year without knowing there are Custom Solutions available to remedy a Power of Sale situation. If you find yourself in Power of Sale proceedings and are looming for available options, our team of professionals is here to help!