What Happens After a Power of Sale in Ontario: The Sale, Leaving the Home, and Whether Money Is Still Owed

How the Lender's Sale Goes

A lender can give a notice of sale only after a default under the mortgage has continued for at least fifteen days, and cannot sell the home until at least thirty-five days after the notice was given (Mortgages Act, section 32).

Once the lender is selling, the lender, not the homeowner, chooses how the home is listed, the price it accepts and when the sale closes. The costs of the process keep being added to what is owed until the sale closes.

When and How the Homeowner Has to Leave

The date the homeowner leaves depends on the lender's sale, on any agreement with the lender, and on any court order.

A writ of possession can be issued only with the court's leave, and the court grants leave only where everyone living in the property has had enough notice of the court case to have been able to ask the court for relief. A writ of possession stays in force for one year and can be renewed (Rules of Civil Procedure, rule 60.10).

An agreed moving date, set before the lender's sale, lets the homeowner plan the move instead of waiting for it.

Money Left Over and Money Still Owed

When a lender sells under the power of sale that the Mortgages Act itself gives, the Act applies the money from the sale in this order: the expenses of the sale, then the interest and costs due on that mortgage, then its principal, then subordinate mortgages and charges by their priority, then certain tenants' rent deposits, and pays what is left to the homeowner (Mortgages Act, section 27).

In Stonefield Capital's experience, if the money from the sale does not pay everything owed, the lender can pursue the shortfall against everyone personally liable for the mortgage debt.

A court order to pay money can be enforced against the person who owes it by seizing and selling their property or by garnishing money owed to them (Rules of Civil Procedure, rules 60.02 and 60.08), so a judgment for the mortgage debt can reach more than the mortgaged property.

The homeowner should get independent legal advice on whether money is still owed after the sale, and by whom.

What Cash for Keys Means

Cash for keys is an informal name for an agreement in which a homeowner leaves the home on an agreed date and receives a payment in return, for example for moving costs or the first months' rent at a new home. Stonefield Capital cannot promise a payment. Whether there is one depends on what the lender agrees to.

Why Agreeing Terms Before the Lender's Sale Usually Leaves the Homeowner Better Placed

Once the lender has sold the home, the homeowner has no say in the price, the date or the terms. Before the lender's sale, the homeowner still has choices, and the earlier the homeowner chooses, the more of them are still open.

In Stonefield Capital's experience, the earlier in mortgage enforcement a homeowner starts negotiating, the more money is left, because interest, legal fees and the other costs have had less time to build. Once the lender has sold the home it is too late for that, so this holds only while the lender's sale is still ahead.

1. 1

   Sell the home on the open market

   A sale the homeowner arranges on their own timeline usually preserves more value than a lender's sale would.

2. 2

   Refinance where there is equity

   Where there is equity left after the arrears and the lender's costs, a new private mortgage can pay out the lender. The guide to stopping a power of sale with a private refinance explains how that works.

3. 3

   Agree an early sale with the lender

   Stonefield Capital can introduce a buyer and put that buyer's proposal to the lender with the homeowner's written permission. The agreement can include an agreed moving date and a payment for moving costs or the first months' rent at a new home. No payment is promised, and the lender may say no.

What Stonefield Capital Can Do, Step by Step

1. 1

   A first look at the figures

   Stonefield Capital reads what the homeowner sends through the form below: the balances, the estimate of value and any lender documents, and compares what is owed with what the home would sell for.

2. 2

   A plain answer on which option fits

   Stonefield Capital tells the homeowner which option fits the situation, including when a refinance or an open-market sale fits better than an early agreed sale.

3. 3

   A buyer and a proposal to the lender, only with written permission

   Where an early agreed sale fits, Stonefield Capital can introduce a buyer for the home and put that buyer's proposal to the lender, only after the homeowner gives written permission. The agreement can include a payment to the homeowner for moving costs or the first months' rent at a new home. Stonefield Capital is paid by the buyer, not by the homeowner.

4. 4

   The homeowner decides

   Nothing is agreed until the homeowner signs, and the homeowner should get independent legal advice before agreeing to anything. Stonefield Capital does not give legal advice, and Stonefield Capital cannot make a lender agree: the lender may say no.