AZ
AZ Real Estate Partners
Power of Sale · Title Insurance · HST
Buying a Power of Sale in Ontario?
Title Insurance and HST Are Non-Negotiable
Power of Sale properties come with no title warranties from the lender-seller. Knowing how title insurance and HST work could save you from serious financial exposure after closing.
Title Insurance
Power of Sale
HST Rules
Buyer Protection
What makes Power of Sale different — and more risky
A Power of Sale occurs when a lender (usually a bank or private mortgage company) exercises its contractual right to sell a mortgaged property after the borrower defaults. Unlike a standard resale, the lender-seller makes no representations or warranties about the property’s title, condition, or compliance. This “as-is” structure is where the risk lives — and title insurance and HST clarity are your two critical defenses.
Why Title Insurance Is Essential in Power of Sale
1
No Warranty of Title from the Seller
In a standard resale, the seller’s APS includes a Warranty of Title — a contractual promise that the title is clean. In Power of Sale transactions, the lender explicitly states it makes no such warranty. Any title problem discovered after closing is entirely the buyer’s problem. Title insurance bridges this gap.
2
Hidden Risks Specific to Power of Sale Properties
- Construction Liens: If the previous owner owed money to contractors, those liens may still attach to the property
- Unpaid Property Taxes: Municipal tax arrears have priority over the mortgage and transfer with the property
- Secondary Mortgages: The first-lender’s sale may not extinguish all registered encumbrances
- Zoning or Permit Violations: Unpermitted additions or renovations can trigger municipal orders against the new owner
- Environmental Issues: Underground storage tanks or contamination not visible in title records
3
What Title Insurance Actually Covers
A standard owner’s title insurance policy protects against:
✓ Unknown liens and encumbrances
✓ Title fraud (someone impersonating the owner)
✓ Errors or gaps in title registration
✓ Zoning or building code violations
✓ Survey or boundary disputes
Premium is a one-time payment — typically 0.1%–0.4% of purchase price — and coverage is permanent for as long as you own the property.
HST on Power of Sale Properties: Know Before You Sign
Common Misconception
Many buyers assume Power of Sale properties are automatically HST-exempt. This is not always true. Whether HST applies depends on the specific property’s history and the seller’s HST registration status — your lawyer must confirm this before you finalize the deal.
1
When HST Generally Does NOT Apply
If the Power of Sale property is a used residential dwelling previously occupied by individuals as their primary residence, the sale is typically HST-exempt. This is the most common scenario, but still requires written confirmation from your lawyer.
- Seller is an HST-registered corporation (e.g., developer’s lender selling a new unit)
- Property previously used commercially — including short-term rental (Airbnb) use beyond a threshold
- Never-occupied new construction in Power of Sale — HST applies to new builds
3
Ontario’s 2026 HST Rebate — Does It Help POS Buyers?
Ontario’s April 2026 policy removes the provincial portion of HST (8%) for first-time buyers of new homes under $1M, effective until March 31, 2027. Power of Sale properties are almost always used residences — not newly constructed — so this rebate typically does not apply to POS buyers.
My Approach: Two Confirmations Before Every Power of Sale Closing
In every Power of Sale transaction I’ve been involved with, I insist on two things before we reach closing: (1) title insurance purchased through your lawyer on closing day, and (2) written HST status confirmation from the lawyer based on the property’s actual history.
The discount a POS property offers compared to market price reflects the risk the lender is transferring to you. Title insurance and HST clarity are the most efficient ways to manage that transferred risk — at a cost that’s a fraction of what a title dispute or unexpected tax bill would cost.
Three Power of Sale Risks Beyond Title and HST
- No repairs allowed: As-is means as-is. Defects discovered post-offer must be accepted, renegotiated, or used to exit — the lender won’t fix anything
- Previous owner may still be in possession: Vacant possession is not always guaranteed; confirm the occupancy situation before closing
- Competitive bidding pressure: POS discounts attract multiple buyers, creating pressure to waive conditions that protect you — resist this
FAQ
Do I need title insurance for a Power of Sale property?
Yes — it’s more essential here than in any other transaction type. Without a warranty of title from the seller, title insurance is your only protection against hidden liens, fraud, and violations discovered after closing.
Is HST payable on a Power of Sale purchase?
It depends on the property. Used residential homes are typically HST-exempt. But if the seller is an HST registrant or the property had commercial use, HST may apply. Confirm with your lawyer before signing the APS.
How much does title insurance cost?
Typically 0.1%–0.4% of the purchase price, paid once at closing. On an $800K property, that’s roughly $800–$3,200. It covers you permanently for as long as you own the property.
Considering a Power of Sale Purchase?
I’ll help you assess the title risks, confirm HST status, and structure an offer that protects your interests — not just chases the discount.
Arthur Zhao · Broker · FRI · ABR · SRS · 📞 416-277-3836 · arthurzhao.realtor
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
