Foreclosure Process in Ontario
The foreclosure process in Ontario is very quick, since all of the necessary documents are disclosed in the original mortgage contract. This quick foreclosure process, which is also called the “power of sale” allows lenders to quickly dispose of or sell mortgaged property.
There are two types of power of sale provisions: Statutory and contractual. In the case of statutory power of sale, the original mortgage contract does not include the specific power of sale process. However, the lender may still exercise their rights under the provision if the loan is past due by more than three months. Statutory power of sale is quite rare today. In a contractual power of sale situation, the specific provisions have been included on the mortgage contract.
In both statutory and contractual power of sale situations, the process is started by providing the borrower a notice after they have been late by at least 15 days. Such notice can be given to any individual who has an interest in the mortgaged real estate, including lien holders, encumbrancers, or people interested in purchasing the property. This notice, known as the Notice of Sale Under Mortgage, includes general details about the original loan and property.
Once this notice has been provided, the borrower has 35 days to bring the loan into good standing in the case of contractual power of sale, and 45 days for statutory power of sale provisions. Lenders may not foreclose on the property or take any other legal actions during this period of time. During this “redemption” period, the borrower may pay the amount that is past due, thereby redeeming the mortgage.
Should the borrower fail to redeem the mortgage, the lender may sell the property. The sale may be conducted by tender, private contract, or auction, but most often through a real estate agent. Specific guidelines for the sale of property must be met, including appraisals, multiple sale listings, and length of time on the market.
All proceeds from the sale must be paid out to owed parties in a specific order. First, all expenses related to the sale of the property must be paid, including the services of the real estate agent. Next, cost and interest owed for the mortgage are paid, followed by principal money for the loan. Subsequent encumbrancers are paid next, followed by the final payee, anyone owed security deposits.