Land Titles Chapter 16 PDF

**Land Titles** - A registration system documents the existence of interest in land. - 2 types of systems (1) Registry system (2) Land Title system **Register System:** - Registry system provides an opportunity to inspect and evaluate documents that may affect real property. - Can s...

**Land Titles** - A registration system documents the existence of interest in land. - 2 types of systems (1) Registry system (2) Land Title system **Register System:** - Registry system provides an opportunity to inspect and evaluate documents that may affect real property. - Can search chain of title - Chain of title is a series of transactions in which ownership was validly passed from one person to the next. - Used in some parts of Ontario and Maritimes - Go back usually 40 years - Provides access to documents but not guarantee their accuracy. Due to this you may want to buy title insurance, which provides a source of compensation if our transaction does not include everything promised. - User of the system (usually the purchaser) bear the risk that there may be a mistake. - **GENERAL RULE:** competing claims are resolved by the timing of registration. As long as the party registering has no notice of prior interest and gave valuable consideration for its purchase, they get the cottage if they registered before me. **Land Title System ( Torrens system):** - **Land title system:** generates certificates of title that virtually guarantee the validity of the interest that are listed. - **Key to land title system is the doctrine of indefeasibility.** - **Indefeasibility:** means that , with very few exceptions, the interests that are included in certificate of title cannot be defeated. 1. **Mirror Principle:** - States that all the interest listed in a certificate of title are valid. - Certificate reflects reality. 2. **Curtain Principle:** - States that the only valid interest in a property are the ones that are listed in the certificate of title - Don't need to search for any other interests. 3. **Insurance principle:** - States that a person who suffers a loss as a result of an error in the system generally entitled to compensation. **Mortgage Fraud:** - Despite the advantages, the principle of indefeasibility has the potential to create hardship for innocent parties. - IF person is improperly removed from the title, the only source of relief may be a claim against the assurance fund. This may take many years and great expenses - Victim of fraud may be required to exhaust all other potential relief before claiming against the assurance fund **( Rabi V Rosu)** ***Differed Indefeasibility*** - Courts developed this doctrine in order to help alleviate the harsh consequences of mortgage fraud. - Is to delay the full effect of the mirror and curtain principles. - **Intermediate owner:** **is a person who obtains a property interest directly from a rouge under a fraudulent instrument**. - **deferred owner***:* **is someone who does NOT deal with the rouge** - The principle of indefeasibility is differed (suspended) until an interest is registered in favor of a person who did NOT transact with the fraudster. - This means that the certificate is not indefeasible for someone who dealt with a fraudster (i.e. that person's interest may be defeated) **Unregistered Interests** ***Unregistered interest in land that may defeat a certificate of title ( i.e. they are exceptions to the principle of indefeasibility):*** 1. **Short term leases** : may be enforceable against a purchaser even if not registered. You should inspect the premise for any signs of tenants 2. **Prescription and Adverse Possession*:*** Its possible to acquire an interest in land as a result of a long period of use or occupation. When you inspect look for squatters. 3. **Public easement:** lawyer should look for signs of activity on the land and perhaps contact the organization in question. If easement does exist, its exact location should be determined. Private easement is generally enforceable only if its been registered. 4. **Unpaid taxes:** If I fail to pay taxes, government may be entitled to seize and sell the land to raise the necessary money. Your lawyer should search the municipal and provincial records to ensure that there are no outstanding taxes. 5. **Unpaid creditors:** Lawyer should search the records in the sheriff office to determine wither there are any writs of execution**. Writ of execution is a document that allows a courts judgement to be enforced** **Writ of execution:** - **As long as the writ is filed while I was the owner, the seizure and sale could take place even after I sold the property to you.** - Too keep the property you would need to pay my debt, you coud then sue me for that amount if I had it. **Registration of Interests In Land** **Land sales :** - Sale occurs when ownership is transferred in exchange for consideration ***Risk Management*** - **General rule for the purchase of land :** Caveat emtor, "let the buyer beware." - Vendor normally has **no obligation to reveal facts** that **would cause a reasonable purchaser to either demand a lower price or walk away from the deal altogether.** - **Exceptions to the rule :** Vendor can't cover up or hide defects, they must actually tell the purchaser about a latent or hidden defect that could cause the property to be dangerous or unfit as a home. - **These risk can be managed by hiring professionals:** Real estate agent, lawyer , appraiser , surveyor ,inspector, environmental auditor. - **These professionals may be a source of compensation** **Agreement of Purchase and sales:** - Sale of real property is created by an agreement of purchase and sale (contract for the sale of land) - **Contract for the sale of an interest in land must be evidenced in writing** - **this agreement is sometimes subject to a condition precedent**. These are conditions that must be fulfilled in order for the transaction to be completed for example: home inspection or purchaser arranges suitable financing. **Conditional Contract:** - **A condition precedent (condition) is a requirement that must be satisfied before the transaction can be completed.** - A **condition does not prevent** the creation of the contract, but it **does suspend** the primary obligations. **Unless and until** the **condition** is **satisfied** the **purchaser does not have to pay the price and vendor does not have to transfer title.** - **Secondary obligation**: They may have subsidiary obligations. This requires a party to use its best efforts to try to satisfy the condition - **Subsidiary obligation not breached** if they **honestly tries, but failed to satisfy the condition.** **Closing:** - Refers to the completion of the transaction - Purchase price is paid. - Adjustments made for any prepayments made by the parties (e.g. if vendor already paid property tax, the price will be increased to reflect the fact that the purchaser will enjoy the benefit of that payment for the remainder of the year) - Purchaser lawyer will conduct a last search to make sure that competing interest have not been filed or registered against the land at the last minute. - Transfer of titles: Deed of conveyance ( used in registry system) Transfer ( used in Land system). **Remedies:** - The purchaser may recover the value of the property that is expected to obtain. - Courts were also prepared to order specific performance. This allows the purchaser to require the actual transfer of land instead of money damages (but must show damages would not suffice). **Hoover v Mark Minor Homes Inc** - **Purchasers Lien :** allows the purchaser to have the land sold in order to satisfy the outstanding debt. - **Vendor Lien:** allows the vendor to have the property sold to satisfy the outstanding debt. - **A lean should be registered as an interest in the property. If it's not it can be defeated if a person buys the land from the purchaser without notice of the vendor claim** **Mortgages:** - **Mortgage** is an interest in land that provides security for the repayment of debt. - **Mortagagor** is the person who borrows the money and provides an interest in land. - **Mortgagee** is the person who lends the money and acquires an interest in land. **Three Common situations involving a mortgage:** ***Mortgage of purchased property-*** the same property is involved in 2 transactions. First you bought a factory from vendor. To pay for this, you granted a mortgage over this factory as a security interest for a bank loan. ***Mortgage Existing Property-*** Use one asset you own already to acquire another asset. You own Whiteacre. You borrow money from the bank to buy Blackacre and mortgage Whiteacre to the bank as security for the loan ***Vendor as Mortagee-*** You sell Greenacre to the purchaser and the purchaser mortgages Greenacre to you as security for the balance of the purchase price owing **Nature of Mortgages** ***Land Title system :*** - **Charge occurs when the mortgagor agrees that the mortgagee will be entitles to enforce rights against the property if the loan is not repaid.** - Mortgage creates a charge over the property. - Mortgagee receives an interest in the land (charge ) - Mortgagor retains title to the land - Charge removed when debt has been paid ***Registry system:*** - Mortgage does not merely create a charge - Involves a conveyance of title. In exchange for the loan, the mortgagor transfers the property to the mortgagee, who becomes the legal owner. - If loan repaid and the agreement is properly performed, the mortgagee must reconvey title to the mortgagor. **Subsequent Mortgages** - **Equity of redemption-** entitles the mortgagor to recover legal title to the land by repaying the loan even after the due date. Equitable interest in the land arising when mortgage is created ( Patranik V Dale ) - **Mortgagor still holds an interest in the land (under both registry and land title systems ) known as "equity".** - **Land system: hold title subject to a charge** - **Registry system: has the equity of redemption.** - This allows for subsequent mortgages which is one that takes effect after the initial mortgage. - Any person purchasing or receiving the land, takes it subject to the mortgage. - It is always important to do a title search to look for mortgage interest in addition to other legal interest - Mortgagor remains liable on the debt ( unless mortgagee waives rights) - Mortgagor can sell its equity (purchaser takes it subject to the mortgagees rights) **Transfer of interest by mortgagee:** - Morgagee can assign its interest to another party ; assignee should register immediately and give notice to mortgagor - The assignee will stand in the place of the mortgagee and enjoy the same rights and be subject to same responsibility. ***Vulnerability of Mortgages:*** - If you have 2 mortgages, you also have 2 outstanding loans, if you fail to repay either one of them,you may lose your land ***Vulnerability of Subsequent Mortgages:*** - If the mortgagee/borrower fails to repay the 1^st^ loan , the dirst morgagee will be entitled to foreclose. - **Foreclosure allows the mortgagee to keep the land for itself** by **extinguishing** the **mortgagors equity of redemption**. If this happens then the subsequent mortgagees interest will be extinguished too. - **If property is sold instead of foreclosed, the first mortgagee will be paid off completely before a subsequent mortgagee can claim any part of the sale proceeds.** ***Priority of mortgages:*** - **mortgages generally take priority in the order that they are registered not necessarily in the order they are created.** **Terms of the Contract:** ***Repayment**:* - borrower must repay the debt according to the parties agreement. - **Acceleration clause : requires the mortgagor to immediately repay the full amount of the loan if a single payment is missed.** - **Prepayment clause:** the mortgagor replays the loan earlier, or in larger instalments, than initially agreed. Mortgagee will impose a financial penalty ( or a bonus ) on the mortgagor for doing so. - **Prepayment privilege:** is a contractual term that allows early or additional payments to be made without penalty. ***Taxes:*** - Mortgagor is normally required to promise to pay the taxes. - Mortgagee may insist upon receiving an appropriate amount of money so they can pay the taxes themselves. ***Insurance:*** - May require to purchase insurance for the property. - Mortgagee may insist on being a beneficiary of the insurance policy. ***Waste:*** - Waste occurs when a property is changed in a way that significantly affects the value. **Remedies for default** ***Suing on the covenant:*** - Suing the mortgagor for the debt - Subject to certain restrictions: in Alberta, BC and Saskatchewan, legislation prevents a mortgagee from bringing a person action against an individual or against a corporation that has not waived its statutory protection ***Possession of the Property:*** - Mortgagee becomes the legal owner of the property under registry system. Therefore, entitled to possession at the outset. - **Under land system**, mortgagee merely acquires a charge, rather than ownership. It **therefore has no natural right to possess the land.** - **Money Not Mud: financial institutions that have little interest in occupying the land. Banks want the money not the mud** - **Obligations:** Must keep the property in good repair and not commit act of waste. Take reasonable steps to generate income from the property and if they do, it is required to pay that money to reduce mortgage debt. - **Redemption:** Morgagor may be able to exercise its equity of redemption ( assuming its still available) by repaying the outstanding debt and resuming possession of the property. ***Foreclosure:*** - Foreclosure is a procedure for extinguishing the morgators equity of redemption ( means mortgagor cant redeem debt) - As long as the lender/mortgagee still holds the land, the borrower can apply to the court to have the foreclosure set aside in exchange for repayment of the loan. - Money Not land morgagees tend to be lending institutions that are not particularly interest in owning the land , they want the money! - **Mandatory sale:** **Foreclosure may seem unfair**. the mortgagor looses the property and subsequent mortgagees lose their security. Mortgagee may be left overcompensated ***Sale:*** - Remedy of judicial sale occurs when the mortgaged property is sold under a judges order. - Judicial sale can't take place unless the court or a government official grants approval for the terms of the sale. - The land and proceeds of sale are used to satisfy outstanding debt. - Can sue Mortgagor personally if there is a deficiency(subject to legislation) - **Mortgagee can sometimes exercise the power of sale.** This is a contractual right that allows the mortgagee itself to sell the land in order to obtain payment **Mortgages on First Nations:** ***Implications:*** - If title to reserve the land can't be transferred, then a creditor cant seize the land to satisfy an outstanding debt. - This means that first nations may face obstacles obtaining financing. ***Workaround to facilitate financing:*** - Have reserve land designated for a long-term lease - Assign the lease to a 3^rd^ party - Once can then mortgage the leasehold interest to a lender - If there is a default on the loan then the lender can then take over the lease ( or even sell the lease) ***What about aboriginal Title?:*** - Lease should be possible under aboriginal title , unclear where it can be mortgaged.