BUYING POWER OF SALE, BANK SALE, TAX SALE, FORECLOSURE PROPERTY (Part-1)
What is a Power of Sale Property?
In Ontario, Canada when a borrower defaults or fails to pay on a home mortgage, the Financial Institution or a lender most often attempts to recover its losses by repossessing and selling the property. “Power of Sale” Clause, sometimes inserted in mortgages or deeds of trust, which grants the lender (or trustee) the right to sell the property upon certain default or non-payment. The property is to be sold at auction but court authority is unnecessary.
Once the creditor is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the debtor. The debtor is thereby completely divested of any interest in the property and has no subsequent right of redemption-recovery of property by paying the mortgage debt in full.
In Canada, there are two main ways a lender can recover a mortgage debt when a borrower defaults:
Judicial Sale or Power of Sale(P.O.S.).
Judicial sale is a sale conducted under the supervision and authority of the court, where a lender must apply to the court to get the court’s permission to sell the property. Power of sale allows a lender to sell property without the involvement of the court. The lender has the right to sell the property from the mortgage document and/or provincial legislation which authorizes power if sale in that province.
Power of sale is used as the lender’s primary recovery method in Newfoundland, New Brunswick, Prince Edward Island, and Ontario. Whereas, judicial sale has been adopted as the primary debt recovery vehicle in British Columbia, Alberta, Saskatchewan, Manitoba, and Quebec. In Nova Scotia, the primary recovery process is called “Mortgage Foreclosure” or “Mortgage Foreclosure and Sale,” but is considered judicial, as the court is involved.
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