Facing a Power of Sale? Here’s What Homeowners Need to Know About Vacant Possession and Sheriff Evictions in Ontario

By Sawyer Fobert and Slonee Malhotra

Disclaimer: This article does not address residential properties which are occupied by tenants. Residential tenancies add nuance and require additional procedural steps, including additional notices to the tenants, as governed by the Residential Tenancies Act.

If you’ve fallen behind on your mortgage and your lender is talking about a Power of Sale, the process can feel confusing and overwhelming. This article provides an overview of the Power of Sale process and important information that every borrower should consider.

1. What is the Power of Sale?

When a mortgagor (borrower) falls behind on their mortgage payments, mortgagees (lenders) frequently exercise their “Power of Sale.” In simple terms, the lender can exercise their Power of Sale to force the sale of the property to recover the debt. In contrast to bankruptcy proceedings, the Power of Sale is frequently touted as a "self-help" or "out of court" remedy for lenders.

2. Freeze Out Periods

To exercise a Power of Sale, the lender must first wait 15 days following the default. Once 15 days have passed, the lender can serve the borrower with a Notice of Sale.[1] The Notice of Sale constitutes formal notice to the borrower that they have defaulted on their mortgage payments and that the lender is moving to sell the property to satisfy the borrower’s debt. Once the Notice of Sale has been delivered, the borrower then has 35 days to bring the mortgage into good standing.[2] The 35-day window is called the Redemption Period.

The lender can’t take any action against the borrower during the 15-day Notice of Sale period and 35-day Redemption Period (together, the “Freeze Out Periods”).[3] The purpose of the Freeze Out Periods is to give borrowers a chance to get up to date on their mortgage payments without being forced to sell their home. If a borrower brings their mortgage into good standing before the end of the Freeze Out Periods, the lender can no longer exercise their Power of Sale.

If, however, the borrower remains in default after the Redemption Period, the lender can proceed with the Power of Sale by applying to the Court for leave to issue a Writ of Possession.

2.1 The Borrower Can’t Dodge Notice

Sometimes, borrowers think that if a lender can’t find them to serve them with a Notice of Sale, then they can keep possession home indefinitely. This does not work. Where a borrower cannot be served, the lender can go to Court to get an Order to proceed with the Power of Sale without formal notice to the borrower.[4]  

3. Vacant Possession

Many homeowners are surprised to learn that even though a lender may have the right to list and sell the property, they cannot force you out.

When residential property is sold, the seller usually needs to provide the buyer with vacant possession, meaning the property must be free of occupants. This creates an issue for lenders who sell properties pursuant to a Power of Sale when the borrowers don’t leave the property.

However, when the lender applies to the Court and obtains a Writ of Possession, the power is conferred upon the Sheriff to forcibly remove the occupants from the property so the lender can deliver vacant possession to the ultimate buyer.

4. Obtaining a Writ of Possession: The Not-so-out-of-court Process

4.1. Starting a court case

To obtain vacant possession, the lender needs a Writ of Possession. A Writ of Possession cannot be obtained without “leave” from the court.[5] In simple terms, “leave” means permission.

To get leave from the court, the lender must start a court proceeding. This is done by the lender issuing and serving a Statement of Claim on the borrower. The relief claimed in the Statement of Claim should specifically include:

1. Order for Possession
2. Leave to issue a Writ of Possession[6]
3. Optional: Damages
   1. Sought specifically when the projected sale proceeds are insufficient to cover the total debt, or the covenant (the "deficiency")
4. Optional: Costs of the proceedings

When a borrower in Ontario is served with a Statement of Claim, they generally have twenty (20) days from the date of service to file a Statement of Defence. If a Statement of Defence is not delivered in time, the lender can proceed with their claim through default proceedings. If a Statement of Defence is delivered in accordance with the Rules of Civil Procedure, the claim proceeds through regular proceedings.

4.2. Leave through Default Proceedings

When the borrower does not file a statement of defence within the prescribed time period, the lender can require the Registrar to note the borrower in default.[7]  Once the Registrar notes the borrower in default, the lender can move before a judge for an Order without giving the borrower notice of the motion.[8][9] The Order needs to specifically grant leave for a writ of possession, which is why it is included in the claim for relief. A court will only grant said leave where it is satisfied that all persons in actual possession of any part of the property received sufficient notice of the proceeding in which the order was obtained to have enabled them to apply to the court for relief.[10]  This includes family members, those with adverse possession interests, and non-residential tenant occupants.[11]

4.3. Leave through Regular Proceedings

When the action is being heard through the regular proceedings (i.e not the default proceedings), the lender needs to go through all the steps required in an action, complying with applicable rules as set out in the Rules of Civil Procedure to get an Order against the borrower which includes the leave to issue a Writ of Possession. In practice, this route takes much longer than default proceedings as getting matters before a judge is slow in Ontario.

4.4. After Leave is Granted -- Obtaining a Writ of Possession

Once the judge has made an Order granting leave to issue a Writ of Possession, the lender must take the following steps to register the Writ:

1. File a Requisition to the Registrar to issue the Writ of Possession (Form 4E)
   1. A formal request to the Registrar to issue the Writ of Possession
   2. Must include the Order
   3. Must include a sworn affidavit which confirms that all persons in actual occupation of the premises have received notice of the proceedings.
2. Once in receipt of the Writ of Possession from the Registrar (Form 60C), it must be filed with the Sheriff

4.5. Filing the Writ of Possession with the Sheriff

The next step in the process is filing the Writ with the Sheriff, together with the required Eviction Information Requirement Form and paying the prescribed fee (Kitchener/Waterloo is $325.00, Cambridge is $344.00).[12] File the materials online through the Ontario Courts Public Portal.[13] You will receive an email notice from the Court Enforcement Office indicating whether your Writ of Possession was accepted and filed or if it was rejected and needs to be rectified. 

5. Enforcing the Writ of Possession

Upon receipt of the filed writ, the Sheriff will schedule a date to evict the occupant, provide notice of the eviction to the occupant, and then physically remove them on the scheduled date, if required.[14] The lender should consider changing the locks to prevent the occupant from returning to the property.