Registering a Notice to try and save a Power of Sale

Often, borrowers loosing their home to a power of sale will take any advise they can get to stop the process. Borrowers are sometimes led to believe that if you register something on title to the property that you can possibly thwart the lender’s ability to physically transfer it. As with most registrations on title if it has nothing to do with describing the land or any kind of transfer therein, then it usually is some kind of monetary encumbrance or one that prevents the owner or anyone with an interest in the land from dealing freely and unobstructed with the land or their interest. Hence you find many notices on title of different kinds of estate rights that were not previously registered or disclosed.

The Land Titles Act offers protection of unregistered estate rights under subsection 71(1) as a notice. Whereby “any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles”.

Unfortunately, what some lawyers are failing to realize is that enforcing a mortgage under a power of sale is for the most part a self-help remedy in favor of the lender. Hence, how could a self-help remedy be available if the borrower can self-help themselves to stopping it? When policy makers were figuring out the Mortgages Act one of their objectives was to promote a confident lending environment for lenders. If mortgage lenders did not have the ability to realize on their security without the consent of the courts, then mortgages would be a lot more expensive and in fewer numbers.

Under the Land Titles Act, subsection 99 (1) provides that “the registered owner of a registered charge (i.e. a mortgage lien) that contains a power of sale, upon registering the evidence specified by the Director of Titles, may sell and transfer the interest in the land or any part thereof that is the subject of the charge in accordance with the terms of the power in the same manner as if the registered owner of the registered charge were the registered owner of the land to the extent of such interest therein.” And that “upon the registration of a transfer under subsection (1) (i.e. a power of sale) and upon satisfactory evidence being produced, the land registrar may delete from the register the entry of an instrument or writ appearing to rank subsequent to the charge under which the land is sold, and thereupon the interest of every person claiming under such subsequent instrument or writ ceases to affect the land”.

But the effect of registering a Notice as an instrument on title referred to above, subsection 71(2) of the Land Titles Act, provides that “where a notice, caution, inhibition or restriction is registered, every registered owner of the land and every person deriving title through the registered owner, excepting owners of encumbrances registered prior to the registration of such notice, caution, inhibition or restriction, shall be deemed to be affected with notice of any unregistered estate, right, interest or equity referred to therein.

Subsection 71(2) of the Land Title Act provides very clearly that “owners of encumbrances” registered before the notice, which includes mortgage lenders with registered charges, will not be “affected” with the estate right claimed. And thus the person relying on the notice would not be protected from when the owner of the land impaired it, such as by giving a lender mortgage rights under their charge. And thus when the land registrar deletes from title the notice appearing to rank subsequent to the charge under which the land is sold, the right for every person claiming under that notice shall ceases to affect the land. This would render registering a notice for the purpose of thwarting a lender relying on a prior registered charge, ineffective. And the mortgage lender’s ability to transfer the property under a power of sale may continue without disruption.

Borrowers have many rights under the Mortgages Act, and as a lender its often difficult to know confidently what they can and cannot do without getting into trouble. Being properly advised either as a lender or borrower is extremely important. The lawyers at Levy Zavet are here to help, reach out to us with any of your mortgage enforcement requirements.