The Ontario real estate market is seeing a massive shift in 2026. With over half of all current Power of Sale listings in the Greater Toronto Area being condominiums, a critical, often-overlooked reality is emerging: the vast majority of these distressed properties are currently occupied by tenants.
When an over-leveraged investor defaults on their mortgage, the bank steps in to sell the property. But what does that mean for the renter living inside? And what does it mean for the buyer looking to score a deal on that unit?
Whether you are a renter nervously Googling your tenant rights in a Power of Sale in Ontario, or an investor considering buying a tenanted Power of Sale, you need to understand how the rules apply in 2026. With ongoing Landlord and Tenant Board (LTB) delays, navigating these transactions requires serious caution. Here is exactly what happens when a tenanted property goes into Power of Sale.
The Golden Rule: A Power of Sale Does Not Erase a Lease
The most important thing for both buyers and renters to understand is that a mortgage default does not automatically terminate a residential lease.
In Ontario, a lease is attached to the property, not just the original landlord. When a bank initiates a Power of Sale, they step into the shoes of the landlord. They do not have the legal authority to simply kick a tenant out to make the property easier to sell.
The bank must respect the terms of the existing lease.
The bank must collect the rent (often through a property management company).
The bank must legally provide 24 hours' written notice before showing the unit to prospective buyers.
For the Tenant: Your Rights and Risks in 2026
If your landlord has stopped paying their mortgage and you receive a Notice of Sale from their bank, it is easy to panic. However, your tenancy is still protected under the Residential Tenancies Act (RTA).
You Cannot Be Evicted Just Because of the Sale: The bank cannot issue an eviction notice simply because they are selling the unit. You have the right to remain in the property while it is on the market.
The "Purchaser's Own Use" Scenario: The real risk to your tenancy happens after the property is sold. If the new buyer intends to live in the unit themselves (or move in an immediate family member), they can issue an N12 eviction notice.
Cash for Keys: Because an LTB eviction in a Power of Sale in 2026 can still take several months due to persistent backlogs, the bank or the new buyer might offer you an N11 agreement (Cash for Keys). This is a mutual agreement to end the tenancy in exchange for a financial payout. You are not obligated to accept this, but it is often highly lucrative.
For the Buyer: The Reality of Buying Tenanted Distressed Properties
If you are a buyer eyeing a cheap condo listing, you need to look closely at the broker remarks. If the property is tenanted, the standard Power of Sale "As-Is, Where-Is" clause becomes much more complicated.
Assuming the Tenant
If the tenant is on a fixed-term lease (e.g., they are only six months into a one-year lease), you must assume that tenant. You become their new landlord under the exact same rental rate and terms. If the original landlord was renting the unit out below market value, you are stuck with that math until you can legally issue a legal rent increase.
The Vacant Possession Trap
If you are buying the property to live in yourself, you will require "vacant possession" on closing. However, banks selling under Power of Sale will almost never guarantee vacant possession.
If the bank issues an N12 on your behalf, and the tenant refuses to leave, the issue must go to the LTB.
As of 2026, LTB hearings can still face significant delays.
If the tenant does not vacate by the closing date, the bank's standard Power of Sale clauses usually allow them to simply cancel the deal and return your deposit, leaving you without a home.
If you are buying a tenanted Power of Sale you need an ironclad strategy. You must have your lawyer review the tenancy agreement, verify the rent history, and factor potential LTB delays into your closing timeline.
How to Navigate the 2026 Market Safely
The surge in distressed condo listings presents an incredible opportunity to buy real estate below peak values, but tenanted properties add a layer of legal complexity that cannot be ignored.
Whether you are a tenant looking to protect your home or a buyer looking to make a secure investment, professional guidance is non-negotiable.
Ready to explore the market? Browse our exclusive list of current Power of Sale properties powerofsaleplus.ca or contact our team today to discuss your buying strategy.
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