Differences between Foreclosure and Power of Sale in Ontario

Before we start, I would like to clarify that different jurisdictions use similar terminology to explain different things. This post only discusses legal terminology in Ontario, Canada. 

When a homeowner defaults on their mortgage, the lender has legal remedies to recover the money owed. In Ontario, the two main enforcement methods are foreclosure and power of sale. While both allow the lender to take action when a borrower fails to make payments, they differ significantly in process, ownership outcome, and frequency of use. Understanding these differences is essential for both homeowners and lenders facing mortgage default situations. 

While both foreclosure and power of sale serve the same ultimate purpose—helping lenders recover mortgage debt—they operate very differently in Ontario.

In a foreclosure, the lender applies to the court to take full ownership of the property. Assuming the lender is successful, an Order is issued and the lender is allowed to be become the registered owner of the property. In this circumstance the borrower loses all rights to the property, including any potential equity. The lender can then sell the property and keep all proceeds, even if they exceed the debt owed. This process, however, is lengthy and costly. It involves court proceedings (which are rarely quick), judicial approval, and time delays before title transfers are registered and certified. Because of this foreclosure is rare in Ontario and more common in other provinces like British Columbia and Alberta, where the legal framework is different.

By contrast, a power of sale allows the lender to sell the property without taking ownership, using the proceeds to pay off the debt. The Mortgages Act is the Act that determines how this method proceeds. There are strict timelines and documents (including the Notice of Sale) which must be prepared and served before the lender can sell the property. If there are any deficiencies, the lender technically would need to start the process over again. Throughout, the borrower technically still owns the property until it is sold, the lender never becomes the registered owner. If the sale price exceeds the amount owed (plus legal and administrative costs), the surplus goes back to the borrower. However, if the sale doesn’t cover the debt owed, the borrower remains responsible for the shortfall.

For example, a lender might choose foreclosure if the property has significant equity and they believe that taking ownership could result in a higher return. In contrast, a power of sale is preferred when the lender’s priority is to recover the loan balance quickly and minimize costs. Power of sale is also advantageous in a volatile market—if property values might drop, a quick sale helps the lender avoid additional losses.

In Ontario, power of sale is far more common because it provides a faster, more efficient and more predictable way for lenders to recover funds without lengthy court involvement. Foreclosure, on the other hand, requires court oversight and permanently transfers ownership, which adds risk and administrative burden for lenders. Lenders may also include Power of Sale provisions in their mortgage contracts, clarifying they will use this as the default enforcement tool.

At Delaney’s Law Firm, we help property owners and potential purchasers understand their legal obligations and avoid costly mistakes. If you’re considering purchasing a property that is being sold under Power of Sale or through a Foreclosure please contact us for tailored legal advice.

This post is a very short overview of complicated laws and legal processes. The content found above is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship.