Default

Learn what default means in Canadian real estate, how it affects mortgages and contracts, and the legal and financial consequences of failing to meet obligations.

Default

May 22, 2025


What is a Default?

Default in real estate refers to the failure to fulfill a legal obligation, such as missing mortgage payments or breaking the terms of a purchase agreement.

Why Defaults Matter in Real Estate

In Canadian real estate, default can occur in multiple contexts:
  • A mortgage default, where a borrower fails to make payments
  • A buyer or seller defaulting on a signed purchase agreement
Consequences of default may include:
  • Lender-initiated foreclosure or power of sale
  • Loss of deposit or legal action by the opposing party
  • Negative impact on credit score

Buyers should only enter contracts they can fulfill, and homeowners should seek help early if they struggle to meet mortgage obligations. In many provinces, lenders must follow legal processes before repossessing a home.

Understanding default is key to managing risk and protecting one’s financial and legal interests in real estate transactions.

Example of a Default in Action

A homeowner misses three consecutive mortgage payments and is issued a notice of default, initiating foreclosure proceedings.

Key Takeaways

  • Occurs when contractual obligations are not met.
  • Can lead to legal action or foreclosure.
  • Applies to mortgages or real estate contracts.
  • Damages credit and buyer reputation.
  • Avoidable with early intervention or legal help.

Related Terms

  • Foreclosure
  • Power of Sale
  • Mortgage Arrears
  • Firm Offer
  • Buyer Risk

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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