When a landlord fails to pay the mortgage, tenants may face uncertainty about their housing situation. In Canada, a power of sale allows a lender to sell a property when the mortgage is in default. However, tenants have rights that protect them during this process.
What Is a Power of Sale?
A power of sale is a legal process that enables a mortgage lender to sell a property without going through a court foreclosure. This typically occurs when the property owner (landlord) defaults on mortgage payments. The lender must follow specific procedures, including providing notice to the borrower and, in some cases, to tenants.
Tenant Rights During a Power of Sale
Tenants are not automatically evicted when a property is sold under power of sale. In many provinces, including Ontario, the buyer of the property must honor existing leases. The Residential Tenancies Act (RTA) in Ontario protects tenants by requiring that the new owner becomes the landlord and continues the tenancy under the same terms until the lease expires.
However, there are exceptions. If the new owner intends to occupy the unit themselves or for a family member, they may issue a notice to end the tenancy. The notice period varies: for a month-to-month tenancy, it is typically 60 days, and for a fixed-term lease, it must wait until the lease ends.
Steps Tenants Should Take
- Verify the Situation: Contact your landlord or the lender to confirm whether a power of sale has been initiated.
- Review Your Lease: Check the terms of your lease agreement, especially regarding termination clauses.
- Know Your Rights: Familiarize yourself with provincial tenancy laws. In Ontario, the Landlord and Tenant Board (LTB) provides resources.
- Document Everything: Keep copies of your lease, rent receipts, and any correspondence with the landlord or lender.
- Seek Legal Advice: Consult a lawyer or a community legal clinic if you receive an eviction notice.
What if the Lender Wants You Out?
If the lender or new owner wants to evict you, they must follow the proper legal process. In Ontario, they must file an application with the LTB and obtain an eviction order. Self-help evictions, such as changing locks or shutting off utilities, are illegal.
Protections for Tenants
Tenants are protected from retaliation. If you assert your rights, your landlord cannot harass you or attempt to evict you illegally. Additionally, some provinces have rent control measures that limit how much the new owner can increase rent.
Conclusion
While a power of sale can be stressful for tenants, the law provides safeguards. Tenants should stay informed, communicate with all parties involved, and seek professional advice when necessary. By understanding your rights, you can navigate this challenging situation with confidence.
