The power of sale process is a legal recourse for mortgage lenders in Ontario when a borrower defaults on their mortgage payments. One of the critical stages of this process is the “Notice of Sale,” which could seem daunting if you’re on the receiving end. This article will provide a detailed understanding of the power of sale process, with a focus on the “notice of sale” stage, and outline the options available to the borrower at each step.
What is a Power of Sale?
A power of sale is a clause often included in a mortgage contract, granting the lender the right to sell the property without court intervention if the borrower defaults on their mortgage payments. This is a swift process, generally taking about three to six months from the default’s date.
Power of Sale Process in Ontario
Stage One: Default
The process commences when the borrower defaults on their mortgage payment. After the borrower is in default for 15 days, the lender can begin the power of sale process.
Stage Two: Notice of Sale
The “Notice of Sale” is the first formal step in the power of sale process. The lender sends the Notice of Sale to the borrower 15 days after the default. This notice includes the amount of the debt, the particulars of the mortgage, and the deadline to pay the arrears (usually 35 days).
Stage Three: Redemption Period
The Redemption Period is the 35 days following the Notice of Sale. During this time, the borrower can reinstate the mortgage by paying off the total amount due, including the default amount, any legal fees, and any late payment penalties.
Stage Four: Statement of Claim
If the borrower doesn’t rectify the situation during the redemption period, the lender may issue a Statement of Claim, outlining the amount owing on the mortgage and demanding its payment. If the borrower fails to respond or pay within 20 days, the lender can pursue a default judgment, enabling them to take the next step.
Stage Five: Writ of Possession
Following a default judgment, the lender can obtain a Writ of Possession. This legal document provides the Sheriff permission to evict the borrower from the property.
Stage Six: Selling the Property
Once the borrower is evicted, the property is listed for sale. The proceeds of the sale are used to pay the mortgage, the legal costs, and any other liens on the property. Any leftover funds are returned to the borrower.
Options for the Borrowers Who Receive a Notice of Sale
Understanding the power of sale process and “notice of sale” in Ontario helps you identify potential courses of action if you’re a borrower facing this situation:
- Pay the Arrears: The easiest way to stop the power of sale process is to pay the amount in arrears before the end of the redemption period.
- Refinance the Mortgage: Depending on your financial situation and property equity, you could potentially refinance your mortgage to cover the arrears.
- Sell the Property: If there’s sufficient equity in your home, you could sell the property yourself and use the proceeds to pay off the mortgage before the lender sells it.
We’re a cash buyer with the ability to close fast, give us a call or fill out our easy questionnaire if you decided that this is the option for you. - Negotiate with the Lender: In some cases, you might be able to negotiate a payment plan with the lender.
- File for Bankruptcy or a Consumer Proposal: While these should be last resort options, as bankruptcy is no joke, and can take a further toll on your situation, this is a step that can halt the power of sale process, but it will come with very serious long-term financial consequences. Please be absolutely sure that there is no other way and consult a professional before deciding on this course of action.
- Legal Action: If there’s an error in the power of sale process, you could potentially take legal action.
Navigating the power of sale process in Ontario, particularly the “notice of sale” stage, can be overwhelming. It’s crucial to understand each stage, your rights, and the options available to you. Consulting with a mortgage professional or real estate attorney can provide guidance and potential solutions to navigate this challenging process. Good luck, and feel free to reach out of you need anything, we’re here to help.
