Chapter 16 – Real Property: Sales and Mortgages
Registration Systems: system for documenting interests in land
Two types of registration systems:
1. Registry system
a. Used in maritime provinces and parts of Ontario and Manitoba
b. Allows others to search title to establish chain of title; a series of transactions in
which ownership was validly passed from one person to the next.
c. Provides users opportunity to view and evaluate documents that affect real
d. The 40 year rule applies – meaning that you are responsible for searching the
title in the last 40 years, but no more.
e. The government’s role in this system is passive; it provides access to the
documents, but it does not guarantee their accuracy.
f. Competing claims for titles in land are generally resolved by the timing of
registration. To manage your risk, register the transfer documents as soon as the
2. Land Titles system
a. Western provinces and parts of Ontario and Manitoba
b. Certificate of title generated for each piece of land virtually guaranteeing the
validity of the interests that are listed.
c. Doctrine of Indefeasibility: certificate usually cannot be defeated. Based on three
i. Mirror principle: all interests on certificate are valid. Certificate of title
ii. Curtain principle: the only valid interests in a property generally are the
ones listed in the certificate. No need to lift the curtain to discover
iii. Insurance principle: compensation for mistakes in the system. Assurance
fund protects victims of system errors. If you lose your land as a result of
an error in the system you are entitled to payment of money.
Mortgage Fraud – a victim of fraud may be required to exhaust all other potential sources of
relief before claiming against the assurance fund. Indefeasibility can cause hardship to original owner. Typical example:
- Innocent person owns Blackacre, a piece of land
- Robgue steals innocent person’s identity and transfer Blackacre to accomplice
- Accomplice uses land as security for a loan from a bank
- Rogue and accomplice disappear
- Bank tries to enforce the mortgage against Blackacre
- Innocent person (original owner) discovers the fraud
- Land titles legislation amendments being contemplated
- Courts starting to reconsider principle of indefeasibility
o Adoption of new concept of “deferred indefeasibility”
Principle of indefeasibility is deferred, or postponed, until an interest is
registered in favour of a person who did not deal with the rogue
Interest registered by a person who did deal with the rogue is defeasible
and may be defeated by original owner
If a bank carelessly allows fraud to occur, it may be responsible for the
Unregistered Interests – may be effective in a land titles system and a registry system.
- Some interests valid without registration, such as
o Short-term leases; say 3-year lease, may be enforceable against a purchaser.
o Prescription and adverse possession; possible for a person to acquire an interest
in land as a result of a long period of use or occupation.
o Public easements (eg sewers, cable lines)
o Unpaid taxes (leading to seizure and sale); you may have to pay any outstanding
taxes on a property that you purchase if you are not careful and don’t search
o Unpaid creditors; writs of execution may be registered with sheriff. Land that you
purchase may be subject to seizure and sale if the previous owner had
outstanding debts owed to the courts.
Risk Management in Land Sales As a matter of risk management, use the following individuals when purchasing land:
- Real estate agent: locate property and professionals
- Lawyer: conduct searches, execute documents, etc
- Appraiser: assess value of property
- Surveyor: determine boundaries of property
- Inspector: assess condition of property
- Environmental auditor: identify environmental hazards
In summary each of these individuals they can prevent problems and provide compensation.
Agreement for Purchase and Sale – a contract for the sale of an interest in land must be
evidenced in writing. The parties must agree on all of the important terms.
- The vendor and the purchaser need not settle every point at the outset. It is very
common for an agreement of purchase and sale to include conditions.
o Condition (or condition precedent) is a requirement that must be satisfied
before the transaction can be completed. A contract, once created, must be
performed even if the agreement turns out to have unexpected costs.
If any condition is not met then the sale will not be completed. One party might still
be held liable. If a condition fails due to lack of effort, the other party may be entitled
- Common conditions that may be put into the agreement for purchase and sale include:
home inspection, financing, sale of house, solicitor’s approval, zoning (for commercial
- Closing: completion of sale
o Conditions removed and final searches done
o Price varied to reflect prepayments
- Document used to transfer title
o Registry system: deed of conveyance
o Land titles system: transfer
Remedies – pg. 385** - General contractual remedies for breach of contract
o Compensatory damages
o Specific performance
Awarded only when monetary damages inadequate
- Special remedies: lien (ability to seize and sell)
o Purchaser’s lien: created whenever the purchaser pays money to the vendor.
Mechanism allowing the purchaser to have the land sold to recover the deposit if
the deal falls through. (Register the lien for security)
o Vendor’s lien: If the vendor sells land on credit without insisting upon full
payment at the time of closing. Mechanism that allows the vendor to have the
property sold to receive purchase price, or outstanding debt. (Register the lien for
o A lien is a type of security interest and may provide priority over other creditors.
Mortgages – an interest in land that provides security for the repayment of a debt. Pg. 386**
- Method of payment for purchase of land
o Land price usually exceeds immediate resources
o Purchase usually financed through mortgage
- Parties to mortgage
o Mortgagor: borrower who creat