Power of sale clause
A power of sale clause is the provision in a mortgage authorising the lender to sell the property on default without first obtaining a court judgment.
It is a small piece of text with very large consequences, because it determines which of Minnesota's two foreclosure routes applies.
What it enables#
With a power of sale clause, the lender may proceed under Minn. Stat. ch. 580 — foreclosure by advertisement. Record a notice of pendency, publish for six weeks, serve the occupant, hold a sheriff's sale. No court.
Without one, chapter 580 is unavailable and the lender must foreclose by action under chapter 581 — a lawsuit, a judgment and decree, a sale, and a court confirmation.
Not a deed of trust#
Worth being precise about, because most national foreclosure writing is about deed of trust states.
A deed of trust involves three parties: borrower, lender, and a trustee who holds title and conducts the sale.
Minnesota uses mortgages, with two parties, and the power of sale runs to the mortgagee. The sale is conducted by the county sheriff under the statutory procedure, not by a private trustee.
That structural difference is why trustee sale terminology, notice of default language, and much of the process described in national guides simply does not map onto Minnesota.
What is actually challengeable#
The clause itself is generally enforceable. Courts are not going to strike a standard power of sale from a standard mortgage.
What is challengeable is the exercise of it. Chapter 580 sets out conditions — the notice of pendency, six weeks of publication, service on the occupant four weeks before, the required additional notices on owner-occupied one- to four-unit property, the certificate recorded within the statutory window.
Those are strict, and defects in them are the most common successful basis for challenging a Minnesota foreclosure.
The trade the lender makes#
Choosing advertisement means giving something up.
Under Minn. Stat. 582.30 subd. 2, no deficiency judgment is available where a mortgage is foreclosed by advertisement with a six-month or five-week redemption period.
So the power of sale clause buys speed and cost savings, and costs the lender the right to pursue the borrower for a shortfall in most residential cases.
For a defaulted homeowner with no assets, that claim is usually worth little, and lenders take the trade routinely. For a commercial borrower or a borrower with assets, the calculation is different — and that is where foreclosure by action appears.
Where to find it#
In the body of the mortgage, not as a separate document.
Anyone trying to work out which foreclosure route their lender can use should look there first, because it settles the question before anything else about the process matters.