Power of Sale vs. Sheriff’s Sale in Ontario: What Is the Difference?

Important: This article covers insolvency options only.

Litvack Group is a Licensed Insolvency Trustee firm. We can advise on consumer proposals, bankruptcy, and how insolvency filings interact with creditor enforcement. We are not real-estate lawyers and cannot provide legal advice on mortgage enforcement, court proceedings, or writ enforcement. If you have received any of the documents described in this article, please speak with an Ontario real-estate lawyer or litigation lawyer as appropriate.

If a creditor has threatened to sell your home, the first question worth asking is: which type of creditor, and which type of process?

The two most common ways a property in Ontario can be sold in a debt enforcement context are a power of sale and a sheriff’s sale. They look similar from the outside. Both can result in a forced sale of a property. But they start from very different places, follow different legal paths, and respond differently to a consumer proposal.

The core distinction can be stated simply. A power of sale begins with rights attached to the mortgage itself. A sheriff’s sale generally begins with an unpaid debt, a lawsuit, a court judgment, and an enforcement writ. Understanding which process applies in a specific situation determines what options are available and how urgent the situation is.

Quick Answer

A power of sale is a remedy available to a mortgage lender who holds a registered security interest in the property. It does not require a court judgment. A sheriff’s sale follows a civil lawsuit, a court judgment, and registration of a writ of seizure and sale. It is initiated by a judgment creditor such as an unsecured lender that has sued and won. A consumer proposal can ordinarily stop collection action from unsecured judgment creditors but does not ordinarily prevent a secured mortgage lender from proceeding with a power of sale.

Key Takeaways

• A power of sale is started by a mortgage lender using security registered against the property when the mortgage was signed. No lawsuit is needed.
• A sheriff’s sale is started by a judgment creditor. A lawsuit, court judgment, and writ of seizure and sale are required before enforcement against land can proceed.
• A consumer proposal can generally stop a judgment creditor from continuing to pursue enforcement of an unsecured claim. It does not ordinarily stop a mortgage lender from proceeding with a power of sale.
• An unsecured creditor, such as a credit card company, cannot sell your home directly. The creditor must first sue, obtain a judgment, and register a writ before any enforcement against land can begin.
• Both processes can affect home equity, and the priority in which proceeds are distributed depends on the registered interests on title.
• Any document related to mortgage default, a court claim, or a writ of execution should be reviewed with the appropriate legal professional promptly.

Quick Comparison

What Is a Power of Sale?

A power of sale is a remedy built into most Ontario mortgages. When a homeowner signs a mortgage, they grant the lender a registered charge against the property as security for the loan. If the borrower defaults on the mortgage, the lender can use that registered security to sell the property and recover what is owed.

The lender does not need to sue the borrower to use a power of sale. The right to sell is already contained in the mortgage contract and is reinforced by Ontario’s Mortgages Act. This is what makes a power of sale faster than a sheriff’s sale and what makes it a more direct threat to a homeowner who has missed payments.

How a Power of Sale Proceeds

• The borrower misses mortgage payments and the mortgage goes into default.
• The lender may issue a demand letter requiring the borrower to repay the full amount or address the arrears.
• Under Ontario’s Mortgages Act, for a typical contractual power of sale, the lender generally cannot issue a Notice of Sale until the default has continued for at least 15 days.
• Once the Notice of Sale is issued, a redemption period begins. The borrower generally has at least 35 days to redeem the mortgage before a sale can proceed.
• If the default is not addressed within the redemption period, the lender may proceed to list and sell the property.
• Sale proceeds are applied to the mortgage balance, accrued interest, and enforcement costs. Any remaining balance after all registered interests are paid may be returned to the borrower.

Secured Creditor Treatment in a Consumer Proposal

Because the mortgage lender holds registered security against the property, it is a secured creditor under the Bankruptcy and Insolvency Act (“BIA”). The BIA contains an express exception that prevents the automatic stay in a consumer proposal from applying to a secured creditor enforcing against its security. Filing a consumer proposal does not ordinarily stop a mortgage lender from continuing with a power of sale.

For more on this topic, see our article: Can a Consumer Proposal Stop a Power of Sale in Ontario?

What Is a Sheriff’s Sale?

A sheriff’s sale in Ontario is a court-supervised enforcement process that allows a judgment creditor to sell a debtor’s property to satisfy an unpaid court judgment. It is authorized under Ontario’s Execution Act.

Unlike a mortgage lender, an unsecured creditor has no pre-existing registered interest in the property. A credit card company, an unsecured lender, or any other creditor owed money on an unsecured basis cannot simply sell the home. They must go through the court system first.

The Sequence That Leads to a Sheriff’s Sale

Every sheriff’s sale starts with the same series of steps. There are no shortcuts.

1. Unpaid debt. The creditor is owed money that has not been paid. This might be a credit card balance, a personal loan, a line of credit, or any other unsecured obligation.
2. Lawsuit. The creditor commences a civil action against the debtor by filing a Statement of Claim. The debtor receives the claim and has an opportunity to respond.
3. Court judgment. If the debtor does not defend the claim or if the court finds in favour of the creditor, a judgment is issued. The creditor is now a judgment creditor.
4. Writ of seizure and sale. The judgment creditor obtains a writ of seizure and sale and files it with the sheriff in the county or district where the debtor owns land. Once the writ is registered on title, it attaches to the land.
5. Enforcement against land. The creditor can direct the sheriff to enforce against the land. The sheriff administers a sale process under the Execution Act.
6. Sheriff’s sale. The sheriff proceeds with a sale, subject to any applicable notice requirements and legal procedures. Proceeds are distributed according to the priority of registered interests on title.

The key point for homeowners is that this process takes time. A creditor cannot move directly from an unpaid credit card balance to a sale of the property. The lawsuit, judgment, and writ registration all need to happen first. Each stage takes weeks or months and gives the debtor an opportunity to respond, contest, or seek legal advice.

That said, once a writ is registered on title, it is a real encumbrance. It can affect the ability to sell or refinance the property and may eventually be enforced. It should not be ignored.

Which Process Can a Consumer Proposal Stop?

This section requires careful reading. The answer is not the same for both processes, and the timing of when a proposal is filed matters.

Power of Sale

A consumer proposal does not ordinarily stop a mortgage lender from proceeding with a power of sale. Mortgage lenders are secured creditors. The BIA’s automatic stay contains an express exception for secured creditors enforcing against their security. Filing a proposal can address unsecured debts and may free up cash flow that allows a homeowner to deal with mortgage arrears separately, but the proposal does not stop the lender’s enforcement rights directly.

Sheriff’s Sale from an Unsecured Judgment Creditor

A consumer proposal is more likely to affect a sheriff’s sale that arises from an unsecured debt. When a consumer proposal is filed, the automatic stay ordinarily prevents included unsecured creditors from continuing collection proceedings on claims that would be provable in a bankruptcy.

Depending on timing and the stage of enforcement, this may interrupt steps in the judgment enforcement process. However, several important qualifications apply:

• If a payment or transfer was completed before the proposal was filed, it may not be reversible.
• If a writ of seizure and sale has already been registered on title, a proposal may affect the creditor’s ability to proceed further, but the writ itself and its effect on title are separate matters requiring legal advice.
• If a creditor holds a registered security interest or lien against the property, that secured position is not ordinarily affected by the proposal’s stay.
• If enforcement is at an advanced stage, such as a sale that has already been administered, the proposal may have little or no effect on what has occurred.

Every situation involving a writ on title, active judgment enforcement, or a sheriff’s sale proceeding should be reviewed individually. A Licensed Insolvency Trustee (“LIT”) can advise on the insolvency side. An Ontario lawyer who handles debt enforcement matters should advise on the legal proceedings.

Trustee Insight

“We often speak with clients who are dealing with both a mortgage issue and a judgment creditor at the same time. The two processes respond to a consumer proposal differently. Getting clear on which type of creditor is pursuing what kind of action is the first step before deciding what to do next.”

— Bryan Litvack, Litvack Group

What Happens to the Equity in the Home?

In both a power of sale and a sheriff’s sale, the proceeds of the sale are applied in a specific order. What a homeowner receives at the end of that process, if anything, depends on how much equity exists above all the claims and costs that need to be paid out first.

How Proceeds Are Generally Applied

• Registered mortgage balances and any other registered charges that hold priority are typically paid first from the proceeds.
• Enforcement and legal costs related to the sale are deducted.
• Other registered interests, such as additional liens or writs that have been registered on title, may be paid out according to their priority.
• Any remaining amount after all registered claims and costs are satisfied is returned to the homeowner.

In practice, the priority order depends on the registered interests on title at the time of the sale. A title search and legal review is required to understand the specific priority position of each registered claim in any individual situation. This is work for a real-estate lawyer, not a LIT.

When Equity Is Insufficient

If the sale proceeds are not enough to cover all the registered claims and enforcement costs, a shortfall may remain. In a power of sale, the homeowner may still owe the mortgage deficiency to the lender after the sale. In a sheriff’s sale, the judgment debt may not be fully satisfied from the proceeds.

An unsatisfied deficiency or judgment balance does not disappear automatically after the property is sold. If that remaining amount is an unsecured debt at that point, it may be addressable through a consumer proposal or bankruptcy. A LIT can advise on those options once the property sale has resolved.

Warning Letters and Documents You Should Not Ignore

Debt enforcement in Ontario follows a paper trail. Every significant step in the process generates a document. Receiving any of the following means legal proceedings are underway or advancing, and a response is needed.

Document

What It Means

Mortgage demand letter

The mortgage lender is formally demanding repayment of the arrears or the full balance. No legal proceedings have been filed yet, but enforcement may follow. This is the time to contact both a real-estate lawyer and a Licensed Insolvency Trustee.

Notice of Sale

The mortgage lender has triggered the power of sale process. A redemption period has begun under Ontario’s Mortgages Act. Time is limited. A real-estate lawyer should be contacted immediately.

Statement of Claim

An unsecured creditor has commenced a lawsuit. The homeowner has a limited time to respond. Ignoring a Statement of Claim typically leads to a default judgment, which accelerates the enforcement timeline.

Default judgment

The creditor has obtained a court judgment, usually because the Statement of Claim was not responded to in time. The creditor can now pursue enforcement steps, including registering a writ.

Notice of Examination

The creditor is asking the court to examine the debtor about their assets and financial situation. This is part of enforcement. It can lead to information that affects how the creditor pursues the debt.

Writ of Seizure and Sale

A judgment creditor has registered a writ against the debtor’s land. The writ attaches to the property and must be addressed before the property can be sold or refinanced without complication. A real-estate lawyer should review any writ on title.

Sheriff’s sale notice

Enforcement has reached the stage where the sheriff is administering a sale. Options at this stage are very limited and immediate legal advice is required.

When Should You Speak With a Licensed Insolvency Trustee?

A LIT cannot stop a power of sale or remove a writ from title. But there are situations where speaking with a LIT alongside legal counsel is the right move, because the insolvency side of the picture affects what is affordable and what options exist overall.

Consider contacting a LIT in the following circumstances:

Before a Creditor Obtains Judgment

If a Statement of Claim has been received but no judgment has been issued yet, a consumer proposal filed before the judgment may stay the collection proceedings on that unsecured claim. Acting before a judgment is entered generally leaves more options open.

When a Writ Appears on Title

If a writ has been registered against the property, the LIT can explain how a consumer proposal would interact with that creditor’s claim and whether it may affect the creditor’s ability to advance enforcement further. A real-estate lawyer should also review the writ’s effect on title separately.

When Unsecured Debt Payments Are Causing Mortgage Arrears

If credit card minimum payments, loan payments, or other unsecured debt obligations are consuming so much of the monthly budget that the mortgage is falling behind, addressing the unsecured side through a proposal may be the most practical way to free up the cash flow needed to keep the mortgage current.

When More Than One Creditor Is Pursuing Enforcement

When multiple creditors are at different stages of collection or enforcement at the same time, the situation becomes harder to manage without a clear picture of all the moving parts. A LIT can assess the full unsecured debt picture, and a lawyer can advise on the legal proceedings. The two consultations can happen at the same time.

Before Borrowing Against the Home to Pay Unsecured Debts

Some homeowners consider refinancing or using a home equity line of credit to pay off unsecured debts. Before doing this, it is worth understanding whether those unsecured debts could be addressed through an insolvency option instead. Converting unsecured debt into secured debt registered against the home has long-term consequences that should be considered carefully.

Frequently Asked Questions

Can a credit card company put a lien on my home?

Not directly. An unsecured creditor such as a credit card company cannot register a lien or charge against your home without first commencing a lawsuit, obtaining a court judgment, and registering a writ of seizure and sale. That process takes time and involves multiple legal steps. If you have not been served with a Statement of Claim, the creditor has not yet started the process that could eventually lead to a writ on title.

Can a creditor force the sale of jointly owned property?

This is a complex area of law. A judgment creditor with a writ registered against one co-owner’s interest in a property may be able to pursue enforcement against that interest, but the rules around jointly owned property, tenancy in common, and joint tenancy involve legal considerations that vary by situation. This should be reviewed with an Ontario lawyer who handles real-estate and debt enforcement matters.

Does a consumer proposal remove a writ from title?

A consumer proposal does not automatically remove a writ from title. The writ is a registered instrument and must be dealt with through appropriate legal steps. What a proposal may do is affect the creditor’s ability to advance enforcement further on an included unsecured claim, depending on timing and the stage of enforcement. It can also remove the writ when the consumer proposal is completed. A real-estate lawyer can advise on removing or addressing a writ registered against the property.

Can I sell my house while a writ is registered?

A writ registered on title affects a property’s title and typically needs to be dealt with as part of any sale or refinancing. In many cases, the writ amount is paid from the sale proceeds before the homeowner receives the balance. A real-estate lawyer handling the transaction will review registered interests and advise on how each needs to be addressed for the sale to close.

Which happens faster: a power of sale or a sheriff’s sale?

A power of sale is generally faster. A mortgage lender does not need to sue and obtain a judgment before proceeding. The right to sell is built into the mortgage contract and the Mortgages Act. A sheriff’s sale requires a lawsuit, a judgment, and writ registration before enforcement against land can begin. That process typically takes months longer than a power of sale proceeding.

Do I receive any remaining equity after the property is sold?

If sale proceeds exceed all registered claims, enforcement costs, and other amounts with priority, the remaining balance is paid to the homeowner. How much, if anything, remains depends on the total of all registered interests, costs, and how the sale price compares to those amounts. There is no guarantee of remaining equity in either a power of sale or a sheriff’s sale context.

Related Reading

• If you have received a Notice of Sale: Can a Consumer Proposal Stop a Power of Sale in Ontario?
• How unsecured creditors are pursuing Ontario properties: Can Creditors Force the Sale of Your Home in Ontario? Sheriff’s Sales Are Rising
• Research on recent Ontario sheriff’s sale activity: Ontario Sheriff’s Sales Surge 36% Above Pre-COVID Levels
• Full overview of how a consumer proposal works: Complete Consumer Proposal Guide for Canadians

About Litvack Group

The Litvack Group is a Licensed Insolvency Trustee firm based in Ontario. Our mission is to help financially indebted Canadians reduce financial stress through personalized attention and clear support throughout the process. We provide judgment-free advice, answer questions honestly, and work personally with clients rather than handing them off during the process.

Head office: 313-290 Caldari Road, Vaughan, Ontario L4K 4J4. Service areas include Toronto, Vaughan, Mississauga, Brampton, Scarborough, Markham, Richmond Hill, Hamilton, Kitchener, London, Oshawa, Barrie, Windsor, and other communities throughout the whole of Ontario.

Disclaimer:

This article is for general information only and is not legal, financial, real estate, or insolvency advice. Every situation is different. Mortgage enforcement proceedings are governed by Ontario’s Mortgages Act and specific mortgage terms. Please speak with an Ontario real-estate lawyer and a Licensed Insolvency Trustee about your specific circumstances before making any decisions.

Sources Referenced

• Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 – Consumer proposals and secured creditor provisions
• Mortgages Act, R.S.O. 1990, c. M.40 – Ontario power of sale provisions
• Execution Act, R.S.O. 1990, c. E.24 – Sheriff’s sale and writ of seizure and sale provisions
• Rules of Civil Procedure, R.R.O. 1990, Reg. 194 – Ontario civil court and enforcement procedures
• Office of the Superintendent of Bankruptcy Canada – Consumer Proposals
• Law Society of Ontario – Find a Lawyer or Paralegal