When mortgages go into default, the mortgagee (ie: the lender) can take sale proceedings, however, there is a process that must be followed. If the process is not followed, the entire sale can be set aside. In this recent case, the appellate court was dealing with a mortgage default sale that was faulty because the mortgagee failed to give the mortgagor (ie: the borrower) a default statement as required under section 22 of the Mortgages Act, R.S.O. 1990, c.M.40.
Despite the non-compliance, an agreement of purchase and sale with an innocent bona fide purchaser for value without notice of the default was completed. The question before the court was whether the sale transaction should be set aside. The lower court set aside the transaction, but the appellate court concluded that this was an error in law: sections 35 and 36 of the Mortgages Act and section 99(1.1) of the Land Titles Act, R.S.O. 1990, c. L.5 (aka the “Safe Harbour Protections”) provided an innocent purchaser taking property under the power of sale process, with good title, on registration under the Land Titles Act system. In this case, the mortgagee made certain declarations to the innocent purchaser professing that they had complied with the power of sale process, such that any remaining dispute over the power of sale process had to be resolved between the mortgagor and the mortgagee: the innocent purchaser for value got to retain the property.
2544176 Ontario Inc. v. 2394762 Ontario Inc., 2022 ONCA 529
https://www.canlii.org/en/on/onca/doc/2022/2022onca529/2022onca529.html