The lender’s bill: how to check what a power of sale really cost you, and how to get money back
The lender says I still owe money after the sale. Is that number right?
Check it before you believe it. In my experience the number on a private lender’s discharge statement is often wrong, sometimes by a lot. The law gives you a way to have it checked, and you do not need to go to court to use it.
I am Paul Franchi, a Licensed Insolvency Trustee in Ontario, and a lawyer by training. Most of the power of sale files that reach me arrive after the house is gone. There is a letter saying the sale did not cover the debt, a number at the bottom, and a person who assumes the number is final. It is not final. It is the lender’s own arithmetic, prepared by the lender, in the lender’s interest. Every line of it can be asked for, examined and, where it does not hold up, taken out.
This page is about that arithmetic. It tells you how to have the lender’s costs assessed without a court application, what you are entitled to see, what should and should not be on the statement, which charges usually do not survive a close look, and what to do if the number turns out to be real after all. The wider road, from the first missed payment to the sale, is on Behind on your mortgage in Ontario: what happens next, and what you can do at each stage. What actually happens in a power of sale in Ontario is on this site’s guide.
You can have the lender’s costs checked without going to court
This is the most useful thing on this page, so it comes first.
Under section 43 of Ontario’s Mortgages Act, the lender’s costs of a power of sale can be assessed by an assessment officer, an officer of the court whose job is to decide whether costs were reasonable. The Act lets any person interested have the lender’s power of sale costs assessed by an assessment officer without a court order, and nothing in the section says that right ends at closing. The sooner it is asked for, the cleaner it is; ask before the discharge statement is treated as final if you can, and ask anyway if you cannot. The cost of the assessment itself is in the officer’s discretion.
That is the whole procedure. There is no lawsuit. You, or your lawyer, ask for the assessment, and the lender has to explain its charges to someone whose job is to decide whether they were reasonable.
Do two things before you ask. Get the documents behind the number, which the next sections cover, and read the statement against the mortgage itself. Then the assessment is a review of a bill you already understand, not a fishing trip.
What is the shortfall, and can the lender really come after me for it?
Yes. In Ontario, a lender that sells your home under power of sale keeps the right to pursue you personally for whatever the sale did not cover.
In a power of sale the lender does not take title. It sells to a third party, applies the money to what you owe, and if there is a gap, that gap is a debt it can sue you for on the mortgage covenant. You can lose the house and still owe money. That is why the after the sale letter exists.
The gap is called the deficiency. This page is about whether the deficiency the lender is claiming is the deficiency the law actually allows.
What documents am I entitled to, and how do I ask?
All of them, in writing. You do not need to be in a bankruptcy or a proposal to ask.
Ask the lender, or its lawyer, for every document behind the number:
- the full payout statement, itemized, not a summary;
- the mortgage ledger, showing every payment credited and every charge added, with dates;
- the invoices behind every charge: the legal accounts, the insurance placements, the property management, the appraisals, the inspections;
- the listing agreement with the agent who sold the house;
- the statement of adjustments from the sale;
- the commission statement.
Ask by letter or email so there is a record, and ask for everything at once. Any borrower, or the borrower’s lawyer, can make this demand. It is not a trustee’s power and it does not need a filing. A lender that will not produce the documents behind its own bill is telling you something about the bill.
What should be on the statement, and what should not?
The principal, the contract interest to the date of sale, the reasonable and authorized costs of the enforcement, and nothing else. Everything beyond that has to earn its place.
Read the statement against the mortgage. Every charge on it has to pass three tests. First, the mortgage actually allows the lender to add it. Second, the lender actually incurred it. Third, the amount is reasonable. A charge that fails any of the three is open to challenge. The guide sets out the governing principle and the authority for it: costs added to a secured claim have to be reasonable, properly incurred and authorized, and they are open to scrutiny.
Which charges usually do not survive?
The ones triggered by your default that bear no relation to the lender’s real loss, the ones charged twice, and the ones the mortgage never authorized.
Check the statement for the following charges.
Default triggered charges out of proportion to any loss. A charge that only arises because you defaulted is a charge the law looks at as a possible penalty. A default triggered charge is unenforceable as a penalty where the sum is extravagant and unconscionable compared with the greatest loss the lender could conceivably have suffered. A “penalty” that duplicates interest the lender is already collecting is the classic example.
Force placed insurance. The lender is entitled to insure the property when you stop. It is not entitled to insure it for years it did not hold it, or to add “placement” fees on top of a premium that already covered the placing.
Anything charged twice. Legal fees that appear both as a lender charge and as a solicitor’s account. NSF fees and statement fees that repeat. Read the ledger for pairs.
Holdbacks and reserves. A “contingency” the mortgage never provided for is money the lender is keeping against nothing.
Fees the mortgage does not name. If you cannot find the charge in the mortgage document, ask the lender to show you where it comes from.
Each of these is a question, not an accusation. The point of the documents is to ask the questions with the paper in front of you.
What if the lender sold the house for too little?
A lender exercising power of sale is not free to dump the property. It has to act in good faith and take reasonable steps to get true market value, and a sale that falls short of that can reduce, or eliminate, what you owe.
The duty is well settled and the guide carries the authority. What it means for you is that the sale itself is part of the accounting. If the house was listed for a few days, sold to the first offer, sold to someone connected to the lender, or sold well under what comparable homes were fetching, the deficiency the lender is claiming is built on a number that may not stand. The listing agreement, the marketing record and the statement of adjustments are the documents that show it. A lawyer reads them. The point of this page is that you ask for them.
What if the number is real after all?
Then it is a debt the lender can pursue you for personally, and the checking you have done still matters.
If the costs were assessed, the assessed figure is what a trustee will ordinarily accept for that part of the lender’s claim. If they were never assessed, a trustee is not bound to take the lender’s number and can require it to be proved. Checking the bill may reduce it. Even if it does not, you will know what the lender is claiming and the documents behind it.
Who these remedies are for. Everything on this page about a consumer proposal or a bankruptcy applies to a person who is genuinely insolvent under the Bankruptcy and Insolvency Act: someone who cannot pay their debts as they come due, or who owns less than they owe. That is not a formality. It is the first thing I assess, and the law requires me to. If you are not insolvent, these are not your remedies. Arranging your affairs to look insolvent when you are not is the worst thing you can do: the Official Receiver examines a bankrupt under oath about the causes of the bankruptcy and what happened to the property, and a discharge can be opposed on exactly those facts. In a consumer proposal the trustee must investigate your property and financial affairs and establish what caused your insolvency. I am bound by my Code not to assist anyone down that road, and I will not.
For a person who is insolvent, a shortfall that survives the checking is unsecured debt, because there is no house behind it any more, and unsecured debt is what a consumer proposal or a bankruptcy deals with. How each of those works, and what they cost, is answered one guide at a time in the Consumer Proposal Resource Centre. This page stops at the bill.
So the order is: check the bill; take out what does not belong; then, and only then, decide what to do about what is left.
Who does what: you, your lawyer, and a trustee
You can ask for the documents yourself. A lawyer challenges the sale and the charges. A trustee’s role depends on which door you are in, and the trustee’s eye for the accounting is the part I bring.
One boundary belongs on this page, and I state it because I hold to it. When a Licensed Insolvency Trustee acts as the administrator of a consumer proposal, the trustee has to tread more carefully than in a bankruptcy, because the assets are not the trustee’s to control. In a bankruptcy the debtor’s property vests in the trustee and the trustee can act on the estate’s behalf directly. In a proposal the home, and any claim about the home, stays yours, and the decision to settle with the lender is yours to make with your own lawyer.
That is the division of labour. You ask. A lawyer argues. A trustee reads the numbers and, if a filing is the right road, runs it.
Can’t find your answer here?
This site is built to answer these questions properly, and most of the time it will. If yours is not here, send it to me. I read them myself, and I answer them personally.
If what you want is to understand your next steps, I can help you with that directly in Ontario. The first thing I will do is assess whether you are insolvent under the Act; if you are not, I will say so. The other Licensed Insolvency Trustees I work with can assist across the rest of Canada.
Common questions
Can a lender charge me its legal fees after a power of sale? Yes, where the mortgage allows it, the fees were actually incurred, and they are reasonable. The same fees charged twice, or fees out of proportion to the work, are the ones to question.
Do I have to be bankrupt to challenge the lender’s statement? No. Any borrower, or the borrower’s lawyer, can demand the documents and have the costs assessed. A filing is a separate decision about what to do with a shortfall that turns out to be real.
What if the lender says there was a surplus but I never received it? The law sets the order. The costs of the sale come first, then the selling lender’s interest and costs, then its principal, then any second or third mortgage in order, then any tenant’s rent deposit, and whatever is left is yours. The lender does not get to keep a surplus, and a second lender is paid before you are. Ask for the accounting that shows where every dollar went.
Is a private lender held to the same rules as a bank? The duties on the sale and on the charges are the same. In practice, private lenders’ statements are the ones that most often carry the charges this page describes, which is why the checking matters more there.
The analysis behind this page
The rules on a lender’s costs, on the conduct of the sale and on the treatment of a deficiency in an insolvency are set out with their sections and authorities on this site’s guide, Power of Sale in Ontario, which this page draws on throughout. This page is general information about Ontario law and not advice about your situation.
