When a borrower defaults on a mortgage, lenders in Ontario have specific legal rights and processes to recover their investment. Understanding mortgage enforcement law and the power of sale process can help lenders protect their interests while complying with complicated regulations. Contact the Ontario real estate team at GS Brar Law to speak with a mortgage enforcement lawyer today. 

What Lenders Can Do When a Borrower Defaults

The Mortgages Act and the Courts of Justice Act govern mortgage enforcement and lender rights in Ontario. When a borrower defaults, lenders have several options to remedy the situation, including the power of sale process. This allows lenders to sell the property without lengthy court proceedings.

Upon default, lenders have the right to: 

• Issue a notice of sale under the power of sale provisions
• Take possession of the property
• Collect rents if the property generates rental income
• Pursue legal action to recover the outstanding debt. 

The specific rights available depend on the terms of the mortgage agreement and how long the default has continued.

Steps Lenders Should Take Before a Power of Sale

Before initiating a power of sale in Ontario, lenders must follow a specific legal process. First, borrowers are typically given 15 days under the Mortgages Act to remedy their default.

After the 15 day period expires, lenders must then issue a formal notice of sale to the borrower and anyone else with an interest in the property. The notice of sale period typically requires the lender to wait an additional 35 days before listing the property for sale. The property must be sold at fair market value, and lenders have a legal obligation to act in good faith throughout the process.

Common Issues That Can Delay Enforcement

Several factors can complicate the mortgage enforcement process. Borrowers may dispute the default or claim the lender hasn’t followed proper procedures. Borrowers also have the right to pay off the debt and “redeem” the property up until the sale is complete. Other creditors with claims on the property may need to be addressed, and lenders must demonstrate they obtained fair market value, which can be challenging in volatile markets.

How a Mortgage Enforcement Lawyer Supports Lenders

A mortgage enforcement lawyer provides essential guidance throughout the power of sale process. Legal counsel can ensure all statutory notice requirements are met, review mortgage agreements to confirm enforcement rights, respond to borrower disputes or legal challenges, and coordinate with real estate agents to handle closing procedures. Working with an experienced lawyer helps lenders avoid procedural errors that could invalidate the sale or lead to liability.

Frequently Asked Questions

How long does the power of sale process take in Ontario? 

The minimum timeline is approximately 50 days from the date of default, but the actual process often takes several months, depending on market conditions.

What happens if the sale doesn’t cover the full mortgage debt? 

The lender can pursue the borrower for the deficiency through a legal action.

Does a lender need court approval for a power of sale? 

No, the power of sale process is conducted outside of court, though if the borrower challenges the process, court involvement may become necessary. Furthermore, a Statement of Claim will need to be issued and served on the borrower if the lender wishes to obtain a court order for possession of the property and for the money owed under the mortgage.

Protect Your Rights as a Lender With a Mortgage Enforcement Lawyer

Mortgage enforcement requires careful attention to legal procedures and timelines. GS Brar Law provides practical legal support for lenders in Brampton and throughout Ontario. For assistance with power of sale proceedings or lender rights, contact us at 905-291-3297 or online.