A current appeal in CIBC v. Computershare raises basic questions under the Ontario Land Titles Act. It’s also the first time that the courts have dealt with the many 2006 changes to the Act.
In CIBC v. Computershare, owners had fraudulently caused a discharge of their first mortgage to be registered. The owners had continued their payments and so the lender didn’t know about the discharge. Later, the owners had taken a loan under a new registered first mortgage. Under the Act, the new first mortgage had priority. But the trial court mistakenly decided that the old first mortgage had priority (CIBC Mortgages Inc. v. Computershare Trust Co. of Canada, 2015 ONSC 543 (CanLII)).
Ontario’s move to electronic land registration has brought a sea change for real estate lawyers. Land titles is now almost the only land registration system in Ontario, and it’s a key part of real estate law.
Many owners and mortgage lenders are now also using title insurance.
Ontario land titles doesn’t give any guarantee when a transfer, mortgage or discharge, in a void document, is registered. But, if a buyer or lender takes a downstream registered transfer or mortgage, in a valid document, land titles can give a guarantee. We often call this a doctrine of “deferred indefeasibility.” For a transfer or mortgage, this moves a risk from the system onto the buyer or lender. The trial court decision in CIBC v. Computershare added to this risk.
The Act itself causes deferred indefeasibility. For example, section 87 gives a guarantee only if what’s registered is a “transfer.” If what purports to be a transfer is in forged document, it’s legally a nullity. It isn’t a transfer and so the Act doesn’t give a guarantee.
In 2007, in Lawrence v. Maple Trust, the Ontario Court of Appeal tried to settle the law and overruled its own previous decision. In 2006, while the case was going through, Ontario changed the Act. Unfortunately, neither the case nor the 2006 changes settled the law.
This time, the Ontario Court of Appeal should settle the law. This won’t remove the basic risk, and the risk can fall unfairly on people who can’t avoid it. Deferred indefeasibility is an old idea and modern land titles systems don’t use it. However, the 2006 changes did give some relief to homeowners.
An article in LAWPRO’s June 2015 real estate webzine discusses the case and suggests the moral of the story.
A case comment by Sam Rappos dated July 10, 2015, one of the lawyers in the case, warns of the dangers of the trial decision and suggests that title insurance is a must.
My case comment on CanLII Connects tries to show the law and give some practical advice. It also refers to how electronic documents are signed and includes an article on the 2006 changes to the Act.
Ontario needs to better understand the land titles system, and how land titles and title insurance work together.
John R. Wood,