Power of Sale is a tool in the hands of mortgagee when the mortgagor has defaulted on any of terms of mortgage. It could be triggered by non-payment of mortgage (even one missed payment is enough to initiate the process however it may not end in actual sale if the mortgagee brings the mortgage in good standing within a certain time) or even by breach of other warranties like non-payment of realty taxes, not carrying proper insurance etc.

Legal Basis for Power of Sale Proceedings

Mortgagees  predominantly rely on the standard charge terms to initiate power of sale proceedings and where there are no standard charge provisions, they may depend on provisions of Mortgages Act to bring about the same result. As indicated above even a single default by mortgagor of any of its obligations results in the entire outstanding balance becoming due and payable which entitles the mortgagee to obtain possession and eventually sell the property. When the default continues for a period of 15 days, the Mortgagee issues a “Notice to Enforce Security Interest” outlining the items that have become due and payable and the amount the mortgagor needs to pay to the mortgagee to redeem the mortgage. This notice is served on every person having an interest in the property be it other mortgagees, off-title spouses of titled persons, lien holders etc. If the mortgagor remedies the default, the process ends there. However, if the mortgagor finds itself unable to make the payment or fulfil its other obligations, the mortgagee files a statement of claim to collect the amounts owed and//or obtain possession in order to sell the property. After receipt of statement of claim, the mortgagor or any other interested person has 20 days to file a statement of defence, failing which the mortgagee may obtain a default judgment and based on that a writ of possession and sell the property to recover its principal, interest, any other charge it encurred since the default.

Important Legal Disclaimer

This article is for the purpose of general information only and should by no means be considered legal advice. You can always contact us to obtain legal advice geared towards your particular situation.