Interested in Buying A Power of Sale Property?

Buying a power of sale property can be an opportunity to purchase real estate below market value but it also comes with unique risks, timelines, and due diligence requirements. Whether you’re considering a freehold home or a condominium, understanding how power of sale works in Ontario is critical before choosing to move forward with this type of purchase.

What Is a Power of Sale?

In Ontario, a power of sale occurs when a lender (usually a bank) sells a property after the homeowner defaults on their mortgage and typically for an extended period of time. Unlike foreclosure in other regions, ownership doesn’t transfer to the lender, instead the lender has the legal right to sell the property to recover the debt.

These properties are often sold “as-is,” which means the lender will not make repairs or guarantee the condition of the home.

Buying a Freehold Power of Sale Property

Freehold properties (detached, semi-detached, or townhomes) are the most common type of power of sale listings—and they can offer strong upside if approached correctly.

Advantages

1. Potential Below-Market Pricing
Lenders are motivated to sell but they also aren’t in the business of losing money on the value of a home. These homes can seem less attractive to some buyers, which can result in aggressive offers.

2. No Condo Fees or Shared Governance
You own the land and structure outright, giving you full control over the property.

3. Renovation Flexibility
Freehold homes often present opportunities for value-add renovations.

Risks & Considerations

1. “As-Is” Condition
There is a stigma that power of sale homes have been neglected. Some expect deferred maintenance, possible damage, or even missing fixtures but this is not necessarily the case.

2. Limited Seller Disclosure
The lender has never lived in the property, so disclosures are minimal. You won’t get the same insights as a typical resale.

3. Inspections May Be Restricted
Some lenders allow inspections, but others may limit access especially in competitive situations.

4. Title Issues or Liens
Although rare, there can be encumbrances on title. A thorough title search is essential and typically standard to any home purchase.

Best Practices for Freehold Buyers

• Always include a home inspection condition if possible
• Budget for unexpected repairs (often 5–15% of purchase price)
• Work with a real estate lawyer experienced in power of sale transactions
• Avoid emotional bidding and stick to your budget

Buying a Condominium Power of Sale Property

Condos under power of sale can be appealing due to lower entry prices, but they come with a different set of risks tied to the condominium corporation.

Advantages

1. Lower Purchase Price Entry Point
Condos are often more affordable than freeholds, making them attractive for first-time buyers or investors.

2. Maintenance Handled Externally
Exterior repairs and common areas are managed by the condo corporation.

3. Urban Investment Opportunities
Many power of sale condos are located in high-demand urban areas.

Risks & Considerations

1. Status Certificate Is Critical
This document outlines the financial health of the condo corporation. It will reveal:

• Reserve fund status
• Pending lawsuits
• Special assessments
• Arrears in maintenance fees

2. Outstanding Condo Fees
In some cases, unpaid condo fees by the previous owner may need to be addressed before closing.

3. Property Condition + Building Condition
You’re not just buying the unit you’re also buying into the building. Poor management or underfunded reserves can lead to future costs.

4. Tenant Issues
Some condo units may still be occupied by tenants or previous owners, creating legal and logistical challenges.

Best Practices for Condo Buyers

• Always review the status certificate with your lawyer
• Confirm whether condo fees are up to date
• Investigate the building’s reputation and financials
• Factor in monthly maintenance fees when budgeting

Who Pays Outstanding Condo Fees?

In Ontario, the buyer ultimately becomes responsible for outstanding condo fees—but how that gets handled depends on the transaction structure.

Here’s how it works:

1. The Condo Corporation Has Priority (Lien Rights)

Under the Condominium Act, 1998, the condo corporation has a lien on the unit for unpaid common expenses (condo fees), plus interest and legal costs.

• This lien has priority over the mortgage 
• That means the lender (selling under power of sale) must deal with it to transfer clear title 

2. In Most Cases: It Gets Paid on Closing

Typically, one of two things happens:

Scenario A (Most Common)

• The lender pays the outstanding condo fees from the sale proceeds on closing 
• The buyer receives the property with a clean slate 

Scenario B (Watch This Carefully)

• The agreement of purchase and sale states the buyer will assume certain arrears 
• The buyer may need to credit the lender for those amounts 

👉 This is why reviewing the fine print is critical.

3. Why You Still Need to Be Careful

Even though it’s usually cleared:

• Interest + legal fees can be significant 
• There may be a pending special assessment not yet registered as a lien 
• The lender will not volunteer to pay more than necessary 

4. The Status Certificate Is Your Protection

Always review the status certificate before firming up the deal. It will show:

• Exact amount of unpaid condo fees 
• Whether a lien has been registered 
• Any upcoming special assessments 
• Financial health of the building 

Your real estate lawyer should review this in detail.

Bottom Line

• Legally: Condo fees are tied to the unit—not the owner 
• Practically: They are usually paid by the lender on closing 
• Risk: If not properly addressed, you could inherit them 

Key Differences: Freehold vs. Condo Power of Sale

Final Thoughts: Is a Power of Sale Worth It?

Buying a power of sale property can be a smart strategy but understand it’s not a shortcut to an easy deal. The biggest mistake buyers make is focusing only on price and ignoring risk.

Whether you’re purchasing a freehold home or a condo, success comes down to:

• Doing thorough due diligence
• Understanding the legal process
• Budgeting for the unexpected
• Having the right professionals on your side

If approached strategically, power of sale properties can offer excellent value but they require a more cautious and informed approach than traditional real estate purchases.

Thinking About Buying a Power of Sale Property?

Before jumping in, make sure you understand both the opportunity and the risks. The right guidance can help you avoid costly mistakes and uncover hidden value.

If you’d like help identifying power of sale opportunities in your area or reviewing whether one is a smart buy reach out anytime.

Buying a power of sale property can be an opportunity to purchase home below market value but it also comes with risks, timelines, and due diligence requirements. Understanding how power of sale works in Ontario is critical before choosing to move forward with this type of purchase.

If you're still interested . . .

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