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Breakdown of Power of Sale in Ontario
When a homeowner in Ontario falls behind on their mortgage payments, the lender has the legal right to sell the property to recoup the money owed. This is known as a power of sale. While this process can be stressful and overwhelming for homeowners, understanding the details of a power of sale in Ontario can help to alleviate some of the anxiety associated with the process.
Difference between Power of Sale and Foreclosure
It is important to note that a power of sale differs from foreclosure. In a foreclosure, the lender takes possession of the property and becomes the legal owner. In a power of sale, the homeowner retains ownership of the property until it is sold.
The Power of Sale Process in Ontario
The process generally involves the following steps:
- Default Notice: If a homeowner falls behind on their mortgage payments, the lender will typically send a default notice. This notice outlines the amount owed and the timeline for repayment.
- Notice of Sale: The lender must provide the homeowner with a Notice of Sale. This notice must be sent at least 35 days prior to the date of the sale and must include details about the property, the amount owed, and the sale date. This document is also sent to all subsequent encumbrances.
- Statement of Claim: If the homeowner does not pay the outstanding balance within the timeline specified in the default notice, the lender can then file a Statement of Claim with the Ontario Superior Court of Justice.
- Sale: The property is then sold. The lender must ensure the property is sold for fair market value. The proceeds of the sale are used to pay off the outstanding mortgage balance and any other costs associated with the sale.
- Surplus Funds: If the proceeds of the sale are greater than the outstanding mortgage balance and associated costs, the homeowner is entitled to receive the surplus funds.
- Judgment: If the proceeds of the sale are less than the outstanding mortgage balance and associated costs, the lender may seek a judgment to recover the remaining balance.
What Are the Rights of the Homeowner?
While the power of sale process can be stressful and overwhelming for homeowners, they must understand that they have certain rights. These rights include:
- The Right to Redeem: The homeowner can redeem the property by paying the outstanding mortgage balance and associated costs before the sale.
- The Right to Notice: The lender must provide the homeowner with a Notice of Sale at least 35 days before the sale.
- The Right to Surplus Funds: If the proceeds of the sale are greater than the outstanding mortgage balance and associated costs, the homeowner is entitled to receive the surplus funds.
- The Right to Legal Representation: Homeowners have the right to legal representation throughout the power of sale process.
- The Right to Challenge the Sale: Homeowners have the right to challenge the sale if they believe that the property was sold for an unfair price or if there were errors in the power of sale process.
The power of sale process in Ontario can be overwhelming for homeowners who find themselves in financial distress. However, understanding the process and the homeowner’s rights can help alleviate some of the stress associated with the process. If you are involved in a power of sale in Ontario, seeking legal advice is vital to protect your rights.