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Summary: A power of sale is what happens when a homeowner in Ontario falls behind on mortgage payments and the lender exercises its right to sell the home. Almost every standard Ontario mortgage includes a power of sale clause. If a lender starts the process, the Mortgages Act gives you at least 35 days after the Notice of Sale to stop it.
What is a power of sale in Ontario?
A power of sale is a legal remedy under Ontario's Mortgages Act that lets a lender sell a defaulting homeowner's property to recover what they're owed. The lender doesn't take ownership: they sell the home, take their costs and the outstanding balance, and return any surplus. It's Ontario's standard enforcement remedy and can only be used after an actual default.
What does the power of sale clause in your mortgage mean?
The power of sale clause is the part of your mortgage that gives your lender the right to sell your home if you default.
Almost every standard Ontario residential mortgage contains one, usually in the standard charge document under headings like "Default" or "Sale of Mortgaged Property." Even when it isn't spelled out, the Mortgages Act implies it into every charge of land in Ontario. You can't negotiate it out, but the Act also fixes how it's exercised, so the notice requirements, 35-day window, and right of redemption apply regardless of lender.
When can a lender start a power of sale?
Only after you’ve been in default for at least 15 days under section 22 of the Mortgages Act. In practice, most lenders wait several weeks before acting. Default usually means missed payments, but can also include failing to insure the property or not paying taxes. Once in default, the typical timeline is:
15-day default period. The lender can’t serve a Notice of Sale until the default has continued for at least 15 days.
Notice of Sale is served. Notice must be given personally or by registered mail. It sets out the amount owed and the date by which you must respond.
35-day notice period. Once the Notice is served, the lender has to wait at least 35 days before taking any further step. This is your window to redeem the mortgage by paying the arrears (the missed payments) plus the lender’s reasonable costs.
Statement of Claim. After the 35 days, the lender can issue a Statement of Claim (a court document that formally starts the lawsuit). From this point on, stopping the sale typically requires paying the full mortgage balance, not just the arrears.
Listing and sale. The lender lists the property and proceeds with the sale, with a duty under Ontario law to act in good faith and take reasonable steps to obtain a fair price.
Distribution of proceeds. Sale proceeds are paid out in order: lender’s costs, the outstanding mortgage, any subsequent liens, and finally any surplus to the homeowner.
Importantly, during the 35-day notice period, the lender can’t take any further enforcement step. If they list the property or issue a Statement of Claim during that window, the Notice can be invalidated.
How can you avoid a power of sale?
If payments are starting to feel tight but you’re still current, acting early gives you the most options. Most lenders would rather work with you than enforce against you. A few practical paths:
Talk to your lender early. Before you miss a payment, most lenders will discuss options like a temporary deferral, an interest-only period, or extending your amortization to lower the monthly payment.
Refinance while your credit is intact. Refinancing into a longer amortization or with a different lender can bring your payment back to a manageable level. See our overview of what a real estate lawyer does in a refinance.
Use a HELOC if you have one. A HELOC (home equity line of credit) lets you borrow against your home equity. Drawing on it isn't ideal, but it's much better than defaulting.
Sell on your own terms. If the situation isn’t recoverable, selling voluntarily before things escalate almost always preserves more equity than a lender-led sale.
How do you stop a power of sale?
If you’ve already received a Notice of Sale, the 35-day window is your best opportunity. After 35 days, options narrow but don’t disappear. Five practical paths, in roughly the order most homeowners walk through them:
Reinstate the mortgage. Pay the missed payments, interest, and the lender’s reasonable legal and administrative fees during the notice period. This is your right of redemption under the Mortgages Act, and once you exercise it, the Notice of Sale is set aside and your mortgage returns to good standing.
Refinance with a different lender. If you have equity but not cash, an alternative lender (sometimes called a B-lender or private lender) may be able to pay out the existing mortgage. The new rate will be higher, but it buys time.
Sell before the lender takes over. You retain the right to sell until the lender takes possession or signs an agreement of purchase and sale. Voluntary sales still preserve more equity than lender-led ones, even under time pressure.
Negotiate a payment pause or plan. Ask your lender for a formal arrangement (sometimes called a forbearance agreement) to pause or reduce payments for a defined period. Lenders sometimes agree, particularly when the hardship is documented and short-term.
Apply for a court injunction. If the lender has miscalculated arrears, served the Notice improperly, or taken a forbidden step during the 35-day window, a lawyer may be able to apply to court to set the Notice aside or pause the sale.
When should you call a real estate lawyer?
If you’re already facing an active power of sale, you’ll likely need a foreclosure or mortgage enforcement specialist, which is a different practice from residential closings. A closing-focused firm like Ownright fits in earlier, at the moments you’re actually signing or restructuring the mortgage paperwork:
Your purchase closing. Your lawyer should walk you through the power of sale clause when you first sign.
A refinance. Your new mortgage has its own clause that should be reviewed.
A voluntary sale. Your lawyer handles the sale closing and the discharge of the existing mortgage.
At Ownright, we focus entirely on Ontario residential real estate law. We help homeowners with purchase closings, refinancing, and sales. You can start your closing online or get in touch with any questions.
Frequently asked questions
Can my lender start a power of sale without warning me?
No. Under the Mortgages Act, the lender must serve a formal Notice of Sale and then wait at least 35 days before taking any further step. Notice must be given personally or by registered mail.
How long does a power of sale take in Ontario?
A typical residential power of sale runs about 3–6 months from the first Notice of Sale to closing. The Mortgages Act requires a 15-day default period before the Notice can be served, plus a 35-day notice period after service.
Will I lose all my equity in a power of sale?
Not necessarily. If the sale price exceeds the lender’s costs and the outstanding mortgage, the surplus is returned to you after any subsequent liens are paid. If the sale doesn’t cover what’s owed, there’s no surplus, and the lender may pursue you for the shortfall.
Can I stop a power of sale after the 35-day notice period?
You may still be able to, but the path is harder. Once a Statement of Claim is issued, you generally need to pay the full mortgage balance, not just the arrears, to reinstate.
Do I need a real estate lawyer for a power of sale?
For an active enforcement matter, you’ll typically need a foreclosure or litigation specialist. For everything around the mortgage itself (your original closing, a refinance, or a voluntary sale), a real estate lawyer is essential.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
Legal references: Sections 22 and 33 of the Mortgages Act govern the notice period and how the Notice of Sale must be served. Section 42 prohibits the lender from taking further enforcement steps during the notice period. Section 27 governs the distribution of sale proceeds. The lender's duty to act in good faith and take reasonable steps to obtain a fair price comes from a line of cases including Cuckmere Brick Co. v. Mutual Finance Ltd., [1971] Ch. 949 and Bank of Montreal v. Owen, 1985 CanLII 2008 (ONCA), with Soundair-style reasoning applied to receiver sales.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
