Your Landlord Defaulted on the Mortgage: 6 Rights That Keep You From Getting Evicted

You've been writing cheques on the first of every month for 18 months. Then a letter arrives from TD or RBC addressed to "Occupant," informing you the property is under a Power of Sale. Your landlord stopped paying the mortgage six months ago. You had no idea.

This happens more often than most tenants realize. In Ontario alone, where roughly 25% of condo units are investor-owned, thousands of tenants occupy properties where the landlord is quietly in default. The 2022-2023 rate hikes are still triggering renewals in 2026, and distressed landlords are walking away from properties where the rent no longer covers the mortgage. You don't find out until the bank sends that letter.

Here's what actually protects you.

The lease survives the Power of Sale

In Ontario, the Residential Tenancies Act treats the bank as the new landlord the moment it takes possession through a Power of Sale. The bank doesn't inherit your landlord's incompetence, but it does inherit your lease. If you have 10 months left on a fixed-term lease, those 10 months remain enforceable. The bank cannot evict you simply because it now owns the property. It must follow the same rules any other landlord follows: file with the Landlord and Tenant Board, prove grounds for eviction, get an order.

This applies in most Canadian provinces with tenant-protection statutes. Even if the mortgage was registered before your tenancy began, giving the lender technical priority, consumer protection laws override that in practice. The lease stands.

You cannot be given 30 days to leave

Banks sometimes send letters that look official and say something like "Notice to Vacate, 30 Days." These are requests, not orders. Without a tribunal order from the LTB, the letter is unenforceable. Ignore threats. The bank's urgency is not your emergency. If they want you out, they need to follow the RTA process, which takes months even when they have proper grounds.

The new buyer inherits you unless they're moving in

If the bank sells the property during the Power of Sale, the new owner steps into the landlord role. Your lease transfers automatically. The only common exception is if the buyer intends to occupy the unit personally or move in an immediate family member. In that case, they must serve an N12 notice, which requires 60 days and one month's rent as compensation. In 2026, that compensation rule is strictly enforced. If they skip it, the eviction is void.

You still owe rent, but verify who gets it

Once the bank takes possession, you must pay rent to the bank, not your old landlord. The formal mechanism is called an "attornment of rent," and you should receive written notice directing you to a new account. Do not redirect payments based on a phone call or an unsigned email. Demand the Notice of Direction in writing. If you pay your old landlord after the bank takes over, you may still owe the bank. If you pay a fraudulent account because someone sent you a convincing email, you're liable for double payment.

Maintenance obligations transfer to the bank

Landlords in default often stop paying for repairs, utilities, and property management. Once the bank becomes landlord, it assumes those duties under the RTA. If the furnace breaks or the roof leaks, file a T6 maintenance application with the LTB. Banks are not exempt from habitability standards.

Your last month's rent deposit stays with the property

Ontario requires landlords to hold the last month's rent in trust. That deposit transfers to the bank or the new buyer. If the bank or buyer tries to collect last month's rent again, refuse and produce your original receipt. The deposit follows the property, not the landlord.

Distressed landlords create distressed tenants, but only if you don't know the rules. The bank's default is not your eviction. The lease protects you until someone follows the process to undo it, and that process is long, formal, and tilted toward keeping you in place.