In the event of a mortgage default due to the failure of a Borrower to make mortgage payments in a timely manner and then further failure on part of the Borrower to bring the mortgage arrears up-to-date by the end of the Notice of Sale redemption period allows the Lender in that situation to take the next steps on the power of sale procedure.

Upon obtaining a default judgement, the Lender can take control of the property and try to recover the debt owed to it by selling the property.

However, despite being in control of the property at this point, there are still certain significant procedural steps that the Lender must follow and keep in mind to ensure that its power of sale is not nullified.

These include but are not limited to the following:

• Making sure that any mortgage holders in priority are paid up to date and in good standing. If the Borrower is not up to date on their payments on one loan, there is a good chance that they are likely not up to date on their other loans as well. As such, in order to make sure any prior lender in priority does not start their own power of sale procedure, a subsequent lender that wants to keep control of the property has to make sure that payments to any prior mortgages are made in a timely manner. The Lender can then add the costs of any payments it makes on behalf of the Borrower to the total of the debt the Borrower owes the Lender.

• Marketing the property on MLS at fair-market value. This is so that the Borrower and/or any subsequent lenders cannot challenge the power of sale process by stating that the property in question was not sold at a fair price and not marketed adequately for sale.

• Making sure that the Agreement of Purchase and Sale (the “APS”) for the property includes specific clauses that outlines to the Purchaser that the deal remains conditional up to and including the day of closing in the event the Borrower is able to come up with sufficient funds to bring the mortgage arrears into good standing.

In addition to the above, there are quite a few other factors to keep in mind as well when finalizing the terms of the APS. As such, any APS for a sale via power of sale should be made conditional on lawyer review for the Lender.

Please feel free to contact one of our lawyers should you have questions about this topic and we will be more than happy to assist you.