The number of homes that have been taken over by lenders under 'power of sale’ is up from last year, data show.COLE BURSTON/The Canadian Press
People who work with overextended real estate borrowers in the Toronto area say they’re busier than they’ve been in more than a decade. The number of homes that have been taken over by lenders under “power of sale” is up almost 60 per cent from the same time last year, according to new data.
Some in the sector are comparing the current climate to the fallout from the 2008 financial crisis.
Robert Marsiglio, a sales representative with Valery Real Estate, who keeps track of distressed real estate, said that searches of the Toronto Real Estate Board show at least 228 current active listings described as “power of sale” (or some variant) as of early September. That’s up 59 per cent from 143 in the same period last year.
“The absolute number has definitely climbed” Mr. Marsiglio said. “There’s also been a big jump in active inventory. However, the growth in power of sales outstripped the 21 per cent growth in the number of available properties in the same region (from 23,626 to 28,640).
Realtor Jon Flynn, who posts statistics on his social media and YouTube channels, argues the absolute numbers may be even higher: By his count, the total power of sales has passed in 780 listings the Greater Toronto Area – as much as 3 per cent of all listings.
Some say the legal system is buckling under the increased workload of power of sale business.
“The power of sale business is always very cyclical,” said lawyer Howard Reininger, who works mainly on behalf of institutional lenders. “I’ve been doing this for 50 years, and it’s been up and down for a lot of them. … When times get tough, people are always going to default. The problem now is not that there are so many defaults, you can’t deal with them. Just now, I couldn’t get an appointment for a motion in [a Toronto court] until April of next year.”
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The power of sale process is not like a foreclosure: Canadian banks or lenders don’t typically end up owning a debtor’s home. However, in most cases, the way a lender secures the return of the money they are owed is through a court-approved sale of a mortgaged property. If there’s any money made in the sale above what the lender is owed, it’s returned to the seller (or their other creditors if there are other claims).
When the demand letters have been served and a power of sale process is under way, borrowers will often hear from someone like Medina Young, a law clerk at Fogler, Rubinoff LP. – which has such clients as Equitable Bank – who walks them through the next steps.
“I’ve been doing this about 35 years … before you’d have waves, but lately it’s full-bore. I would say two, almost three, years it has not stopped – we’ve been constantly full-on busy,” Ms. Young said. One change she is seeing is that many of the borrowers have less equity and larger debts than in the past. “Most of my files, at least 70 per cent used to have money left over. We still have some, but not nearly as much as before. More times than not, they don’t get any money,” she said.
Ms. Young has also noted a larger number of working families among her files, people who might not previously have ended up facing power of sale unless a major job or health event intervened.
“For 10 years I didn’t talk to a homeowner: if your house is going up 10 per cent a year and money’s free, you don’t need an insolvency trustee,” said Scott Terrio, a consumer insolvency expert who works with Hoyes, Michalos & Associates, helping advise people who can’t pay their debts. He, too, has seen more employed people who are simply over-leveraged come to him either in the middle of a power of sale or with one imminent. “In 2024, I talked to one-third of the homeowners I’m talking to now. They are all teachers, firefighters, cops. Two years ago, I was doing two to five meetings a day, now I’m doing 10,” he said.
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There’s also an increase in the number of investment properties facing power of sale.
Toronto accounted for 38 per cent of the power of sale properties in Mr. Marsiglio’s data, but fully half of those listings are for condominium apartments. In the GTA as a whole, condos made up 28 per cent of the power of sale listings. The problems may go even deeper, since some of the properties weighing on indebted homeowners haven’t even been built yet.
“I do encounter a good number of clients who paid a deposit for an investment property, and now the price of the property has fallen, so they cannot find a mortgage to cover it. If they cannot close, they are exposed to liability,” said F.M. Sajid B. Hossain a lawyer with Nanda & Associate Lawyers, who is defending a number of clients in power of sale proceedings.
Ms. Young said that while it was once rare for a lender to record a loss on their power of sale, in the condo market, it’s becoming increasingly normal.
“I checked with one of my bigger clients, I said ‘You’re taking a loss of almost $200,000?’ It’s to the point where if they had a mortgage when the market was good for $600,000, now they can’t sell the property for $400,000,” she said.
Mr. Terrio thinks there’s still a lot more debt to unwind and more pain to come for those amateur investors who flooded into the condo market to buy apartments when, even in good times, rents barely covered the mortgages.
“I’m talking to people who have not one but three rental condos; these people would have been fine if they had not done this,” said Mr. Terrio. “I’m projecting, based on normal numbers, we’ll exceed the biggest insolvency year ever in 2009.”
Canada’s Office of the Superintendent of Bankruptcy recorded 158,441 insolvencies of all types in 2009; in the seven months it has released data for in 2025 there have been 84,610, which is on pace to surpass 2024’s total of 143,483, if not quite rival 2009.