What is the difference between power of sale and foreclosure in Ontario?

They are two different remedies and people mix them up constantly. Under a power of sale, the lender sells the property to recover what it is owed: the title transfers directly from the owner to the new buyer, any surplus left after the debt and costs belongs to the borrower, and the lender can still sue the borrower for a shortfall if the sale does not cover the debt. Under a foreclosure, the lender goes to court to take title to the property itself: it keeps any surplus but generally cannot sue for a shortfall, and the process takes a year or more. Power of sale is faster and is by far the more common remedy used in Ontario, which is why almost every distressed listing in Ontario is a power of sale, not a foreclosure.

Are power of sale properties a good deal in Ontario?

Often they are not, and that surprises people. By law the lender cannot simply dump the home: under Royal Bank of Canada v. Soundair Corp. the lender must act in good faith and run a commercially reasonable sale aimed at fair market value, or it exposes itself to liability. So the price usually reflects the market, not a giveaway. On top of that, a power of sale home is sold as-is with no warranties, the agreement is written to favour the lender, and there are real title and possession risks. A genuine discount, when it exists, is usually the market pricing in those risks, not free money. Treat the listing as a property to investigate carefully, not a bargain to grab.

What are the risks of buying a power of sale home?

Five worth knowing before you offer. First, it is sold as-is, where-is with no representations or warranties, so what you inherit is what you get. Second, the agreement of purchase and sale is one-sided and largely non-negotiable, drafted to protect the lender. Third, title insurance can exclude known problems such as open building permits, work orders, or tax arrears, because once you know about a risk you are taken to have accepted it. Fourth, the borrower keeps a right of redemption right up until closing, meaning they can pay what they owe and reclaim the home, and the deal you signed can simply evaporate. Fifth, you may inherit an existing tenant, because a tenancy survives a power of sale and you become the landlord. None of these are reasons to never buy; they are reasons to have a lawyer experienced with power of sale read everything before you commit.

How long does the power of sale process take in Ontario, and can I stop it?

Under section 32 of the Ontario Mortgages Act, the lender cannot even send a notice of sale until the default has continued for at least 15 days, and then it cannot complete the sale for at least 35 days after that notice. Those 35 days are your redemption period: if you can pay the arrears plus the lender's reasonable costs, you can stop the sale and keep your home. That is a narrow window but a real one, and it is why getting advice early matters so much. If you are behind on your mortgage, do not wait for the notice to arrive before you call a lawyer or a mortgage professional, because options shrink as the clock runs.

If my home is sold under power of sale, do I get any money back?

You might, and it is your money, not the lender's. After a power of sale the lender takes only what it is owed: the outstanding mortgage, interest, and its reasonable costs of enforcement and sale. Any surplus above that belongs to you, the former owner, after other registered claims like a second mortgage are paid in their order. This is one of the key differences from foreclosure, where the lender keeps the whole property. Because the lender has a legal duty to seek fair market value rather than dump the home cheaply, a properly run sale is meant to protect that surplus. If you are in this situation, a lawyer can confirm what you are entitled to and make sure the sale was conducted properly.

For buyers and sellers · Advisory

Power of Sale in Ontario: A Protective Guide for Buyers and for Owners Who Are Behind

Power of sale is not foreclosure, and it is not a guaranteed bargain. What the Ontario Mortgages Act actually requires, the real risks for a buyer, and the rights and the clock for an owner who has fallen behind. Plain English, official sources, no sales pressure.

Originally published January 2008 · Updated 2026 · 7 min read

Jasmina Zivkovic

REALTOR®, RE/MAX Your Community Realty Inc.

In 2008, on the first version of this website, I advertised a service that promised buyers early access to “bank foreclosures, power of sales and other good deals.” I was younger in the business then, and I was repeating the language everyone in real estate used. I want to start here by saying plainly: I would write that line very differently today. Power of sale is not a bargain bin, and the people on the other side of those listings are usually having one of the worst years of their lives. Almost twenty years and two full market cycles later, here is what I have learned, written for the two people who actually search for this: a buyer wondering what the catch is, and an owner who has fallen behind and is frightened.

Both of you deserve straight answers, so let me walk you through it.

Power of sale is not foreclosure

This is the first thing to get right, because the words get used interchangeably and they should not be.

Power of sale means the lender sells your home to recover what it is owed. Title passes directly from the owner to the new buyer; the lender never takes ownership. Any money left over after the debt and the lender’s reasonable costs belongs to the borrower. And critically, the lender can still pursue the borrower for a shortfall if the sale does not cover the loan. It is the faster remedy, usually measured in months, and it is the one Ontario lenders almost always use.

Foreclosure is a court process in which the lender asks to take title to the property itself. It keeps any surplus, but in exchange it generally gives up the right to sue for a shortfall, and it takes a year or more. It is rare here.

So when you see a distressed listing in the Greater Toronto Area, it is almost certainly a power of sale. That single distinction changes who carries which risk, and it matters to both the buyer and the owner. The rest of this guide follows that split.

For the buyer: investigate before you fall for the word “deal”

The honest first answer is the one most people do not want to hear: a power of sale is often not the bargain it is sold as.

By law the lender cannot simply dump the home. Under Royal Bank of Canada v. Soundair Corp., the 1991 Court of Appeal decision that still governs these sales, a lender must act in good faith and run a commercially reasonable process aimed at obtaining fair market value. A careless, “improvident” sale exposes the lender to its own liability, so the price you see usually reflects the market, not a giveaway. On the rare occasion a home does sell for less, that gap is not a reward waiting for you; it is the market pricing in real risk that becomes yours the moment you close. So before you let the word “discount” do your thinking, understand what you would be taking on.

It is sold as-is, where-is. There are no representations and no warranties. The lender has often never lived in the home and discloses almost nothing. What you inherit is what you get, including problems no one mentions.
The agreement is written for the lender, not for you. The agreement of purchase and sale that comes with a power of sale is one-sided and largely non-negotiable. The usual buyer protections may be stripped out.
Title insurance can exclude the very problems you are worried about. Open building permits, outstanding work orders, unpaid property taxes: once these are known, an insurer can exclude them, because you are taken to have accepted a risk you knew about. The policy is not the safety net you assume.
The owner can take the home back until the moment of closing. The borrower keeps a right of redemption right up to closing. If they find the money to cure the default, they can reclaim the home, and the deal you signed and planned your life around can simply disappear.
You may be inheriting a tenant. A residential tenancy survives a power of sale. Under section 47 of the Mortgages Act you step into the landlord’s shoes, bound by the lease and by the Residential Tenancies Act. The home may not come empty.

None of this means you should never buy a power of sale home. It means you treat the listing as a property to investigate methodically, with a lawyer experienced in power of sale reading every clause before you commit, not as a prize to grab before someone else does. If you want the wider discipline I bring to any purchase, it is the same one I walk through in my checklist before making an offer and in how to avoid buying the wrong home, and the closing-day protections I cover in my guide to real estate fraud in the GTA matter doubly here.

For the owner who is behind: you have rights, and you have a clock

If you are the person on the other side of one of these listings, I am sorry. This is a frightening place to be, and the noise online treats your home as someone else’s opportunity. Let me give you the facts instead, because they are more on your side than you might think.

The process is set out in the Ontario Mortgages Act, and it is not instant. Under section 32, a lender cannot send a notice of sale until your default has continued for at least 15 days, and then it cannot complete a sale for at least 35 days after that notice. Those 35 days are the minimum window before the lender can complete a sale, not the whole of your chance to save the home. If you pay the arrears plus the lender’s reasonable costs, you stop the sale and keep your home, and that right to redeem does not expire at day 35: it continues right up until the property is actually sold. (There is also an older statutory route for mortgages with no power-of-sale clause, which needs roughly three months of default plus a 45-day notice, but it is rarely used.)

Two more things you should know, because few people tell distressed owners the good parts:

The surplus is yours. After a power of sale, the lender takes only what it is owed: the mortgage balance, interest, and its reasonable costs. Anything above that belongs to you, after any second mortgage or other registered claim is paid in order. The lender does not get to keep your equity. That is one of the real differences from foreclosure.
The lender cannot sell it cheap to be rid of it. The same Soundair duty that disappoints bargain hunters protects you. The lender must seek fair market value, which guards the surplus that is yours.

The single most useful thing you can do is act early. Do not wait for the notice to arrive. Call a lawyer who handles power of sale, or a mortgage professional about refinancing or a sale on your own terms, while you still have time and choices. The options are widest before the clock starts and narrowest on day 34.

What the 2026 numbers actually say

I include these because you will see frightening headlines, and I would rather you have the real figures and the real context.

The phenomenon is genuinely growing. Teranet, the company that records every property transfer in Ontario, counted 2,979 power-of-sale transactions in 2025, close to five times the level of 2022 (Globe and Mail, June 2026). Of the homes that sold in 2025 after being bought at the 2022 peak, about 36.6 percent sold at a loss, the same data shows. Roughly a third of power-of-sale filings come from the major banks and about two-thirds from private and alternative lenders, whose borrowers were often already stretched.

Now the context that the headlines leave out. The national share of mortgages 90 or more days behind was 0.24 percent at the end of 2025 (CMHC Residential Mortgage Industry Report, May 2026). That is rising, and Ontario is rising faster than the country, but it is still, by long historical standards, a low number. The great majority of homeowners are current on their mortgages. I tell you this not to dismiss anyone’s stress, but because fear is a poor basis for a decision on either side of this transaction. Rising is not the same as widespread.

A note on the law, and how I can help

This guide is education, not legal advice. Power of sale turns on documents and deadlines, and the single most important step for a buyer or an owner is to retain a lawyer experienced with power of sale before you sign anything or let a deadline pass. The official rules live in the Ontario Mortgages Act; I would rather point you to the statute and a good lawyer than to anyone selling you a story.

What I can do sits beside that, not in place of it. If you are a buyer looking at a power-of-sale listing, I will investigate the property with you the same way I would any home, and help you write down the exact questions to take to your lawyer before you commit. If you are an owner who has fallen behind, I can talk you through your options for selling on your own terms while you still have time, with no pressure and complete discretion. If you are simply weighing the wider market, my guide to buying in Richmond Hill and York Region in 2026 puts these numbers in their fuller context.

Either way, the offer is the same one it has always been: a careful second opinion, at no cost and no obligation. Power of sale is one of the few corners of real estate where a calm, methodical guide is worth more than a fast one. Ask me, and we will work through it together.

Frequently asked questions

What is the difference between power of sale and foreclosure in Ontario?: They are two different remedies and people mix them up constantly. Under a power of sale, the lender sells the property to recover what it is owed: the title transfers directly from the owner to the new buyer, any surplus left after the debt and costs belongs to the borrower, and the lender can still sue the borrower for a shortfall if the sale does not cover the debt. Under a foreclosure, the lender goes to court to take title to the property itself: it keeps any surplus but generally cannot sue for a shortfall, and the process takes a year or more. Power of sale is faster and is by far the more common remedy used in Ontario, which is why almost every distressed listing in Ontario is a power of sale, not a foreclosure.
Are power of sale properties a good deal in Ontario?: Often they are not, and that surprises people. By law the lender cannot simply dump the home: under Royal Bank of Canada v. Soundair Corp. the lender must act in good faith and run a commercially reasonable sale aimed at fair market value, or it exposes itself to liability. So the price usually reflects the market, not a giveaway. On top of that, a power of sale home is sold as-is with no warranties, the agreement is written to favour the lender, and there are real title and possession risks. A genuine discount, when it exists, is usually the market pricing in those risks, not free money. Treat the listing as a property to investigate carefully, not a bargain to grab.
What are the risks of buying a power of sale home?: Five worth knowing before you offer. First, it is sold as-is, where-is with no representations or warranties, so what you inherit is what you get. Second, the agreement of purchase and sale is one-sided and largely non-negotiable, drafted to protect the lender. Third, title insurance can exclude known problems such as open building permits, work orders, or tax arrears, because once you know about a risk you are taken to have accepted it. Fourth, the borrower keeps a right of redemption right up until closing, meaning they can pay what they owe and reclaim the home, and the deal you signed can simply evaporate. Fifth, you may inherit an existing tenant, because a tenancy survives a power of sale and you become the landlord. None of these are reasons to never buy; they are reasons to have a lawyer experienced with power of sale read everything before you commit.
How long does the power of sale process take in Ontario, and can I stop it?: Under section 32 of the Ontario Mortgages Act, the lender cannot even send a notice of sale until the default has continued for at least 15 days, and then it cannot complete the sale for at least 35 days after that notice. Those 35 days are your redemption period: if you can pay the arrears plus the lender's reasonable costs, you can stop the sale and keep your home. That is a narrow window but a real one, and it is why getting advice early matters so much. If you are behind on your mortgage, do not wait for the notice to arrive before you call a lawyer or a mortgage professional, because options shrink as the clock runs.
If my home is sold under power of sale, do I get any money back?: You might, and it is your money, not the lender's. After a power of sale the lender takes only what it is owed: the outstanding mortgage, interest, and its reasonable costs of enforcement and sale. Any surplus above that belongs to you, the former owner, after other registered claims like a second mortgage are paid in their order. This is one of the key differences from foreclosure, where the lender keeps the whole property. Because the lender has a legal duty to seek fair market value rather than dump the home cheaply, a properly run sale is meant to protect that surplus. If you are in this situation, a lawyer can confirm what you are entitled to and make sure the sale was conducted properly.