Genesis Associates Mortgage Brokers on Mortgage Power of Sale (866) 410.4410

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Genesis Associates Mortgage Brokerage and Administration on Mortgage Power of Sale

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Power of Sale:

A clause sometimes inserted in mortgages and deeds of trust, giving the mortgagee (or trustee) the right and power, on default in the payment of the debt secured, to advertise and sell the mortgaged property at public auction (but without resorting to a court for authority), satisfy the creditor out of the net proceeds, convey by deed to the purchaser return the surplus, if any, to the mortgagor, and thereby divest the latter's estate entirety and without any subsequent right of redemption.

This legal right to force the sale of the mortgaged property upon default without judicial proceedings is by far the most common remedy taken by mortgagees in Ontario. The Power of Sale differs from a judicial sale in that no significant court involvement is required and sending a notice initiates the process, rather than the more complex requirements found in judicial sales and foreclosures.

A power of sale can be either contractual or statutory. A notice of sale must be provided to the mortgagor, together with subsequent encumbrances and others having an interest in the property. If the property is a matrimonial home, others having an interest would include the spouse of the mortgagor.

A prescribed notice under the Mortgages Act can be sent 15 days following default. The notice can be delivered by registered mail or by personal service.

If a contractual power of sale is undertaken, the mortgagor has 35 days to remedy this situation. If the power of sale is statutory, the time period is 45 days. No action can be taken by the mortgagee within the 35 or 45 day redemption periods.

If the time limit has expired and the default is not corrected, the mortgagor can proceed to sell the property.

In the Sale of Property, power of sale properties in Ontario are typically listed by real estate brokers. Regardless, the mortgagee must ensure that the property is fairly promoted in the marketplace.

The Ontario Real Estate Association has developed two forms to assist real estate practitioners regarding powers of sale:

Certificate of Power of Sale: Confirmation for the listing broker that the mortgagee has authority to market the property under power of sale.
Seller Selling Under Power of Sale: A schedule to be attached to the Agreement of Purchase and Sale (Form 100) attesting to the seller's authority as mortgagee to sell the property under power of sale.

The Mortgages Act (Sec. 27) sets out an exact procedure concerning funds disbursement arising from a power of sale:

All expenses incurred regarding the sale or any attempted sale

Discharge of all interest and costs due under the mortgage

Dishcarge of all principal money due under the mortgage

Payment of amounts due to subsequent encumbrancers in order of priority

Payment to tenants of rent deposits paid under the Tenant Protection Act when the deposit was not applied in payment of the last rent period.

Any residue to be paid to the mortgagor