Should I Get a Lawyer to Handle My Ontario Power of Sale or Foreclosure?

Lenders in Ontario sometimes have to deal with mortgages that have fallen into default, although this is a rare occurrence. When deciding which method to use to deal with mortgage arrears, the term often used is default management. Simply put, this is the process put in place by lenders when an Ontario homeowner falls behind in mortgage payments. 

The two methods used in Ontario include the Power of Sale and foreclosure. The vast majority of Ontario-based lenders will choose the Power of Sale method to handle mortgage default. Power of sale is a faster process and does not involve the courts to complete.

The Canadian Bankers Association’s February 24 update reported on properties in Ontario that were in arrears as of November 2020. Mortgage Broker Store has access to a broad network of private lenders located throughout the Province who can help negotiate a private mortgage to help you pay arrears and enable you to make your monthly mortgage payments possible. The number remains very low despite the ongoing pandemic and its spinoff effects on various sectors of the Canadian economy. Out of 2,083,895 owned properties in Ontario, only 2,008 mortgages are currently in arrears, representing just 0.1%.

Other Types of Default

Lenders refer to default as the act of failing to fulfill the terms of the mortgage contract. Defaulting on any loan or contract occurs when terms are not met, or payments are late or absent. The primary cause of default for Ontario homeowners is mortgage arrears, though it can also stem from other factors.

1. Failure to pay property taxes

2. Failure to pay insurance 

3. Having liens on a property 

4. The first mortgage on a property is in default and can trigger a second mortgage default.

5. Failure to maintain the property to ensure the condition is livable.

Lenders under the Ontario Mortgages Act are entitled to initiate a Power of Sale or foreclosure when mortgage default has become an issue, although some mortgage contracts will clearly outline the specific terms of mortgage default.

Regardless of what method a lender chooses to use, it is only after a particular mortgage has been in arrears for a minimum of 15 days that the Mortgage Act will permit the lender to attempt to sell the mortgaged property to third properties to try to make up for any losses due to mortgage default.

Know the Steps Involved in Taking Possession of Your Property

Ontario Homeowners should be fully aware of the steps lenders must strictly follow when using either default method available to them.

1. The Ontario Mortgage Act mandates a 15-day grace period for homeowners to address missed payments or breached terms before lenders can initiate Power of Sale proceedings.

2. After the 15-day period following a mortgage contract breach, homeowners can receive a notice of sale specifying default and a 45-day redemption period in Ontario.

3. If a homeowner has not brought the mortgage out of arrears, the lender will send a Statement of Claim specifying that he/she intends to take possession of the property.

4. If the mortgage is still in arrears your lender is now in the position to sign a default judgment to ask the court to issue a Writ of Possession. 

5. When the courts grant it, the Sheriff will receive the Writ of Possession directly from the court and is now in the position to fill out the necessary paperwork to start the eviction process.

6. The Sheriff will now send a  Notice of Eviction, which will specify the time and date that the homeowners must vacate the property.

7. In the final stage of a Power of Sale, the lender regains possession to sell the property, with substantial fees borne by the previous owner. Despite potential profit, costs often diminish it. The property sells at fair market value, possibly through auction, in its current condition.

What Legal Steps Can Be Taken to Stop Power of Sale?

There is time to stop the Power of Sale or foreclosure process. Legally, there are methods to try to delay the process. Consulting a real estate lawyer is crucial whether you aim to delay or halt property repossession by your lender.

Methods of delaying the process include:

1. File a Statement of Defence- One option open to Ontario Homeowners to try to delay the process is to bring into question the validity of the mortgage or the legal proceedings. A lawyer can represent you when clear mistakes may have been made by the lender. A judge will determine the legitimacy of the default process. Chances of winning are slim unless clear violations, like not receiving agreed funds, occur. Hence, it’s often not advisable. The fees associated can range up to 30,000 dollars. Only use this option if the mortgage lender has made very clear violations of the Ontario Mortgages Act. This essentially represents a delay tactic that can buy more time to put your mortgage in good standing. Consider the financial implications, as legal fees can be high (up to $2000 to $3000), making this a delaying tactic.
2. Request a delay from the judge by contesting the validity of the mortgage process in court to potentially postpone proceedings. Predominantly, however, judges tend to judge in favour of the lender. 

It’s always best for homeowners to prioritize bringing their mortgage into good standing before exploring other options. Seeking legal advice from a real estate lawyer is crucial when facing potential property repossession despite the associated costs. When you are buying or selling your property a real estate lawyer will also be necessary.

Mortgage Broker Store Can Provide Direction Concerning Legalities

At Mortgage Broker Store we are very experienced in the Power of Sale and foreclosure process. It is important to understand what legal advice might be needed if you are facing possible possession of your home.  We can also provide a list of lawyers that can give you a free consultation regarding your Power of Sale. 

Mortgage Broker Store has access to a broad network of private lenders located throughout the Province who can help negotiate a private mortgage to help you pay arrears and enable you to make your monthly mortgage payments possible. Seek legal advice promptly to prevent the lender from repossessing your property.

Need advice? Speak with us, call 416-499-2122 or email ron@mortgagebrokerstore.com.

jonathan March 23rd, 2021

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