Power of Sales Real Estate

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Power of Sale procedure involves the recovery of money due, the unpaid interest and associated costs by requiring the sale of a real property when a debtor fails to issue payment. Once there is a default for a predetermined amount of time, dependent up the state, the lender can serve a legal notice of default to the debtor informing them of the amount due and what is required to cure the default.

A Power of Sale date is set if the delinquency and Power of Sale costs are not recovered within the specified time period. The property may then be sold during a public sale.

The defaulting borrower has the opportunity to redeem the property up until the time of Power of Sale by paying the required delinquencies and costs. When the property is sold, the creditor receives any amount that was due with the lender receiving any remaining funds.

A judicial Power of Sale is involved if the lender brings a Power of Sale suit against the defaulting borrower because of the delinquency and forces a sale. Several states that have mortgage systems or in deed of trust states use judicial Power of Sales when it appears as if the amount due is greater than the real property's equity value and the lender wants to get a deficiency judgment for the amount due after the sale. It is not required in states that provide deficiency judgments without filing a lawsuit.

In Canada , many a times people erroneously refer to a "Power of Sale " as "Foreclosure" sale but these two are distinctly different.

Here below I have given definition of various terms that are commonly used in the Power of Sale field

A proceeding in which the financer of a mortgage seeks to regain property because the borrower has defaulted on payments. This proceeding shall attempt to bar or extinguish the mortgagor's equity of redemption in mortgaged real property.



POLICY L.P. 105-5

DATE ISSUED: January 8, 1993


If a mortgagor/charger defaults on the terms of the mortgage/charge/debenture, then the mortgagee or chargee can take action to take title to the property. The following outlines the steps that the mortgagee can take to get title to the lease.

Because a mortgagee can take title to a lease, every lessee of the Crown must obtain consent from the Crown to charge or mortgage the leasehold interest. See policy LP 105-2 " Mortgages, Debentures, Charges: Ministerial Consent ".


CHARGEE- person/company who lends out the money.

CHARGOR - person/company who borrows the money.

MORTGAGEE- the person/company who supplies the money and holds title to the property as security.

MORTGAGOR - the person who is borrowing the money.

POWER OF SALE - is a term within the mortgage giving power to the

mortgagee (lender) to sell the mortgaged property.

NOTE: *The terms mortgage, mortgagee and mortgagor are interchangeable with charge, chargee and chargor.


A *mortgagee (lender), depending on the type and conditions of the mortgage contract, has one of four possible options with regard to enforcing the mortgage in the event of a default.

  1. Sue for payment.

  1. Take possession of the property. The mortgagee must pay all expenses owing, such as taxes, rent, insurance, utilities, etc. The mortgagee may then sublet the property to a tenant and apply the rent to the mortgage payments.

The Minister must approve a sub-lease.

  1. Take possession and obtain a court order to sell the lessee's interests. Any amount received over the debt owed belongs to the mortgagor. If the sale does not recover enough money, the mortgagor is still liable for the balance owing.

This sale is a transfer and must be approved by the Minister.

  1. Take possession and apply to the courts for full foreclosure. If foreclosure is granted, the lender becomes the sole owner, of any interests the borrower had and no funds are owing to the borrower. If the lender asks for a foreclosure, the borrower may request a forced sale instead. The importance between sale and foreclosure is that under a sale the borrower can recover any remaining equity s/he may have in the property after all debts have been honoured. Under foreclosure, the borrower recovers nothing.


A mortgagee may exercise a power of sale in accordance with Part III of the Mortgages Act and with the terms of the mortgage where the borrower defaults for at least 15 days and the lender gives at least 35 days notice, of intention to exercise the power of sale, to every person having an interest in the mortgaged property .

NO POWER OF SALE - in the mortgage, a mortgagee may exercise a statutory power of sale (Part II of the Mortgages Act) after three months default in the payment of moneys due under the mortgage and 45 days notice to persons having an interest in the mortgaged property.

When a sale transaction has been completed, a purchaser will get good title if the sale papers are executed and presented to the Land Registrar as proof that the power of sale has been carried out properly.

SALE PAPERS - include the following:

  1. a statutory declaration by the mortgagee, the mortgagee's solicitor or agent as to the actual existence of the default; and

  2. a statutory declaration proving service of notice, including production of post office receipts for registration of registered mail, if any; and

  3. a statutory declaration by the mortgagee or the mortgagee's solicitor that the sale complies with Part III, or, where applicable, Part II, of the Mortgages Act

  *Source : http://www.mndm.gov.on.ca/MNDM/MINES/LANDS/policies/lppolicy/lp105-5_e.asp

Nawel K. Seth, M.A.Sc; MBA; M.V.A.
Broker of Record
Trail Blazers Realty
, Brokerage,
Toronto Tel: 416.630.1999 / 905.660.7999. Toll Free 1.866.890.1999



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