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Foreclosure Rules in Ontario

The foreclosure proceedings in the province of Ontario are quite quick, as these Canada foreclosure proceedings are generally given out in the mortgage documents.

Initially, power of sale was developed in this province by lenders who wanted to dispose property as well as recover debt, very faster way. As a result of this need, they started including power of sale provisions in those mortgages that allowed them to dispose away property under the default of the borrower’s, without the intervention of the courts. The method of power of sale is now under the Ontario Mortgages Act of Canada foreclosure.

Two kinds of power of sale are under the Mortgages Act – the contractual and statutory. When mortgage documents include power of sale provisions, it is contractual power of sale. Statutory power of sale occurs in case the mortgage documents do not include power of sale provisions. Statutory power of sale may be rare but the lender can exercise the power of sale until the borrower has failed to pay for three or more months.

Both the abovementioned types of power of sale begin when a notice is given to the borrower after a period of 15 days of default. The notice has to be given to anyone who has an interest in that property, including statutory lien holders, succeeding encumbrances, or even those who have placed in writing their interests in the property to the lender. The notice is tied to the Mortgages Act, and it is then known as a “Notice of Sale Under Mortgage”. The notice includes details of the mortgage like:

  • The date when the mortgage was made,
  • A warning that the lender will sell away the property in case the amounts owing are not cleared within a specified date,
  • The parties to property mortgaged and to the mortgage, and
  • The owing amounts

If it is contractual power of sale, then the borrower gets 35 days to pay, if it is not stated otherwise in the mortgage agreements. If it is statutory power of sale, the borrower gets 45 days to pay. The lender does not have any power do anything more within the “redemption” period, however the borrower may redeem the mortgage by paying the amounts owing.

After the expiry of the redemption period and the failure of the borrower to amend the default, the lender may sell the property. Through power of sale, the lender can sell property by private contract, auction, or tender. Generally, real estate agent lists the property and places it on the market for sale. To make sure, a large section of the market notices the property, proper guidelines are set up, including listing the property under multiple listing services, getting appraisals, and ensuring that the listing is meant for the normal period of such foreclosed properties.

After the property is sold off and if there is some surplus, then the lender has to account to other subsequent encumbrancers and the borrower. According to the Mortgage Act the proceeds of the sale firstly has be applied to the rate of conducting the sale, and then to cost and interest owing under the mortgage. Then the proceeds will go to the principal money owing, next to pay the amounts because of subsequent encumbrancers, and eventually to pay security deposits of tenants.

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