Mortgage enforcement in Ontario – RMS Estates Law

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Mortgage enforcement in Ontario

Raluca M. Soica
September 26, 2023

This article aims to provide an overview of mortgage enforcement in Ontario and how it works.

Mortgages are contracts between a property owner and a lender (usually an institutional lender). A mortgage is registered against the owner’s property to secure the loan. If the property owner has failed to make payments following the contract terms, a mortgage enforcement action will be taken.

Two standard solutions are used in this situation: the Power of Sale and the Foreclosure Power of Sale.

Essentially, a power of sale enables the lender to sell the owner’s property to repay the mortgage loan as well as any interest or expenses incurred by the lender. Before going through the power of sale process, the lender must adhere to a stringent procedure.

Foreclosure Power of Sale: a legal process in which a lender can take possession of a homeowner’s property to satisfy a debt. The homeowner will receive the surplus funds if the debt is paid off and there is a surplus of funds.

Power of Sale is carried out as follows:

A breach of the mortgage contract has occurred, and the property owner has failed to make one or more mortgage payments. If this problem is not resolved immediately, potential action will be taken.
The lender will send a Notice of Sale if the owner still needs to pay. Before giving the Notice of Sale, the lender must wait at least 15 days.
There is a third step known as the redemption period, in which the property owner can cancel the sale of their home if all mortgage debts have been repaid. If the lender cannot achieve the third step, a Statement of Claim will be filed, giving the lender the right to sell the property. A court must approve the lender’s claims, and the court must be satisfied that the lender has followed the strict procedures outlined above.
Once the home has been sold, the property owner will receive compensation if all debts have been paid off. Due to all parties involved in the sale: the real estate lawyer, the real estate agent, the lender, interests, and other parties, if applicable, the homeowner will typically receive little money after the sale.

In the event of a foreclosure, the lender will obtain title to the property and initiate the foreclosure process. Foreclosure actions commonly occur during periods of recession in the market. There is a bit more complexity to the process: the owner must be notified if payment has yet to be made within the next two to three months. The lender must obtain a Certificate of Foreclosure, and the property owner must transfer the property to the lender. Property owners will have no rights to the property and will have no leverage in negotiating the home price on the open market. It is common for lenders to avoid this process since it involves a significant amount of court involvement.

Ultimately, a real estate lawyer can assist individuals with understanding the process of power of sale and foreclosure in Ontario. Further, a real estate lawyer can explain how the home sale will be impacted. Typically, foreclosure properties are sold below market value, whereas power-of-sale properties are sold at market value. If you have any questions regarding this procedure, please do not hesitate to contact RMS Estate.

PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.

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(647) 694-5290
raluca@rms-law.ca
2005 Sheppard Avenue East, Suite 100, Toronto, Ontario M2J 5B4

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