Adverse Possession & Land Titles Conversion Qualified Lands

Post by: Evan Holt

A recently released Ontario Superior Court of Justice decision clarifies adverse possession claims with respect to property registered in Land Titles Conversion Qualified (LTCQ). The lands in dispute were converted to LTCQ on December 14, 1998. Here, “the critical time period is the time prior to the conversion of title into Qualified Land Titles”.

On October 22, 2004, the plaintiff purchased 322 King Street, Peterborough. The plaintiff had previously been a tenant of the property for a number of years. On December 22, 2000 the defendant purchased 320 King Street, Peterborough, which lies to the east of the plaintiff’s property.

The plaintiff asserted that the defendant no longer had a right-of-way over the easterly 8 feet of the plaintiff’s land. Additionally, the plaintiff asserted that possessory title had been established with respect to a triangular strip of land on the west side of the defendant’s property which had been enclosed by a chain-link fence, and a 6 inch encroachment on the defendant’s property caused by a garage constructed on the plaintiff’s land.

As of the date of registration, LTCQ lands are subject to:

  1. the limitations, qualifications and reservations contained in subsection 44(1) of the Land Titles Act (Ontario) save and except for the provisions of subparagraph 11 (subdivision control), subparagraph 14 (dower rights);
  2. the rights of any person who would, but for the Land Titles Act (Ontario), be entitled to the Lands or any part of it through length of adverse possession, prescription, misdescription or boundaries settled by convention; and
  3. any lease to which subsection 70(2) of the Registry Act (Ontario), attached hereto, applies.

Although not discussed here, as of the date of registration, LTCQ lands are not subject to provincial succession duties and escheats or forfeiture to the Crown.

“Section 51(2) of the Land Titles Act preserves a possessory title if the length of possession that is necessary has elapsed by the time the conversion in the Land Title system takes place”. Therefore, the plaintiff had to establish that prior to December 14, 1998, the requirements of possessory title were satisfied.

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To establish a claim of possessory title, the plaintiff must prove:

  • actual possession for the statutory period;
  • that such possession was with the intention of excluding the true owner; and
  • discontinuance of possession for the statutory period by the true owner.

An affidavit dated October 21, 1998, provided by the now deceased previous owner of the plaintiff’s land stated that:

  • the garage was constructed and used prior to the previous owner’s acquisition of title to the land in 1939. During the occupation of the previous owner the garage was used without interruption or interference;
  • the owners or owner of the defendant’s property had maintained a fence in the same location as the chain-link fence continuously for a period greater than 30 years;
  • that no part of the 8 foot right-of-way had never been used by occupants or other permitted users of the defendant’s land.

The court found the statements made in the affidavit to be reliable despite the inability of the evidence to be cross examined. The court also found that this evidence demonstrated that the garage and fence had been in place for at least 10 years prior to conversion into the Land Titles system. No evidence to the contrary was provided by the defence. The court granted a declaration that the defendant’s land was subject to the encumbrances of the plaintiff.

The court found for the plaintiff with respect to the defendant’s right-of-way over an 8 foot portion of the plaintiff’s land. The court was satisfied that prior to LTCQ registration the predecessors in title to the defendant’s land had abandoned the right. This was demonstrated through the affidavit evidence and the location of the garage and fence that blocked the use of the right-of-way. In the alternative, the court also noted that the right-of-way was granted in 1913 and ceased to be enforceable 40 years after its original registration.

Access the full decision by clicking here.

Due Diligence and the Land Titles Registry

Post by: Evan Holt

3 principles underlie the Land Titles Registry:

  • the curtain principle, which stands for the proposition that it is unnecessary to examine the history of previous dealings with the land;
  • the mirror principle, which stands for the proposition that the Register is an exact reflection of the current state of title; and
  • the insurance principle, which stands for the proposition that the government guarantees the accuracy of the Registry and compensates those that suffer a loss as a result of inaccuracy.

The recent 2015 Ontario Superior Court of Justice decision, CIBC Mortgages Inc. v Computershare Trust Co. of Canada (the “Case”), appears to have altered the duties of mortgagees and purchasers in the Land Titles Registry with respect to the underlying principles.

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In the Case, Computershare Trust Co. of Canada (Computershare), the first mortgagee, was granted a mortgage against the property by the owner of the subject property. The owner then acted fraudulently to discharge Computershare’s mortgage which gave the owner title to the property free of any encumbrances. CIBC Mortgages Inc. (CIBC), the second mortgagee, was then granted a mortgage on the property by the owner/fraudster believing that CIBC’s mortgage was a first priority mortgage on the property. Additionally, Secure Capital MIC Inc. (Secure Capital), the third mortgagee, was granted a mortgage to the property believing Secure Capital’s mortgage was a second priority mortgage.

The owner/fraudster continued to make payments on the Computershare mortgage to maintain the fraud. It was only upon default of the Computershare mortgage that the fraud was discovered. The Case was brought to determine the priority of the charges registered against the property.

It was determined that the Computershare mortgage was a valid charge that had been fraudulently discharged. The discharge was a void instrument as registration of a fraudulent instrument will not cure its defect. Both the CIBC mortgage and the Secure Capital mortgage were found to be valid instruments. However, the interest in the property granted to CIBC and Secure Capital could be defeated by a claim of a bona fide owner or mortgagee, namely Computershare.

CIBC and Secure Capital were considered intermediate owners, meaning that the mortgagees, as bona fide purchasers for value, gained an interest in the land from the immediate dealings with the fraudster and had the opportunity to discover the fraud. To rely on the Land Titles Registry, a party must demonstrate due diligence before registering a charge on a property. In the Case, the court considered that the intermediate owners should have at least inquired as to how the owners were able to pay out the Computershare mortgage given their current financial standing.

This decision at the very least erodes the principles that underlie the Land Titles Registry. No longer can a mortgagee or purchaser of interest in a property simply rely on the accuracy of the Land Titles Registry. To rely on the mirror and curtain principles, a mortgagee or purchaser of interest must demonstrate that the interest was acquired subject to a diligent examination into the history of previous charges and discharges on title. Additionally, due diligence must be demonstrated for remuneration from the Assurance Fund. Thus, due diligence appears to be a requirement for any reliance or protection afforded by the Land Titles Registry.

Of interest is the finding that, had a bona fide purchaser for value purchased the interest of the property from CIBC and Secure Capital, that purchaser would be said to hold title to the land better than anyone in the world. Thus, although a fraudulent instrument may not create good title to land, it is capable of establishing a chain to good title to land.

This decision is currently being appealed. The trial decision can be found by clicking here.

Only specific relatives can be on title for HST rebate

Post by: Evan Holt

The HST new homebuyer’s rebate entitles qualified purchasers to a substantial rebate. The maximum federal and provincial portion of the rebate is $6,300 and $24,000 respectively.

A Tax Court of Canada decision released at the end of March has further clarified who can qualify for the rebate.

“[T]itle may be held by the buyer jointly with a specific blood relation, including a child and grandchild, a brother or sister, and relationships by marriage or common-law partnerships — even if the relative doesn’t live in the house.”

Here, an uncle was on title with his niece for mortgage financing purposes. As this relationship is not a category recognized by the legislation the purchaser did not qualify for the rebate.

“This means that if just one of the buyers does not qualify, even as the owner of a one percent interest in the property, none of the buyers can get the rebate.”

For the full Toronto Star article click here.