August 13, 2024
Highlights
All Ontario real estate owners need to be aware of the recent change implemented by the government in relation to Notice of Security of Interests. The new Homeowner Protection Act 2024 introduced on June 6, 2024, made significant changes to the registration and enforcement of Notice of Security of Interests in Ontario. Creditors will no longer be able to register their security interests on title to the properties where consumer goods are installed as chattels or fixtures. This article will introduce you to these changes in the law and highlight the impacts that comes as a result.
A Notice of Security of Interest (NOSI) is a lien registered on title notifying the public of an interest of a creditor in the personal property. This provides security to a creditor who allows the property owner to rent certain equipment and fixtures. The Notice of Security of Interest is recorded in the Land Registry System so that a creditor is protected upon the sale or refinancing of the property. The registration notifies anyone with existing or future interest in the property that a specific fixture on the premises is encumbered by a security interest. Consumers are often unaware of the registration on title when they rent the equipment. It only comes to light during the purchase, sale, or refinance of a property as lawyers conduct a title search on the property. Equipment on the property that requires a NOSI includes water heaters, air conditioners, furnaces, water softeners, water purifiers, etc.
There are two major effects that come from the Homeowner Protection Act 2024.
The first effect being that the NOSI can no longer be registered against the property where consumer goods are concerned. As per Section 1 of the Ontario’s Personal Property Security Act, “consumer goods” are “goods that are primarily used or acquired for personal, family or household purposes”.
The second effect being that existing registered NOSIs registered as of and prior to June 5, 2024, are considered expired. These are no longer of effect, and they may be deleted by an application submitted by your solicitor subject to legal fees & disbursements.
If a new NOSI is not in relation to consumer goods, this must be confirmed by a statement signed by a lawyer. In such cases, the NOSI will be registered pursuant to section 54 of Ontario’s Personal Property Security Act.
Following these changes in the law, creditors would have to pursue by independent means of enforcing their security interests. Where creditors were able to wait for the sale or refinance of a property to recover their payment, they now will have to begin legal proceedings to enforce their debts. They would have to wait to obtain judgements in these proceedings and register writs of executions on title. This places consumers in the same position as before but consumers would incur significant additional costs as per the rules of the court.
The alternate route that creditors can take to enforce security is by seizure and sale as per the Personal Property Security Act (PPSA). The collateral concerned in many cases is HVAC equipment and the disruption caused by such harsh enforcement will result in the consumer incurring significant additional costs.
Many creditors also would turn to reporting consumer defaults to credit reporting agencies. This would then remain on the consumer’s credit report for a seven-year period despite the resolution of all defaults. This would not be a route for the creditor if the option to passively enforce the default through NOSI existed.
Creating a transparent real estate market allows homeowners to protect their interests and buyers to make fully informed decisions. Being aware of the new changes in the law is essential for ensuring the legality of any property transaction. As proactive real estate lawyers in Toronto, we prioritize keeping our clients updated on the latest legal developments. At Bradshaw & Mancherjee, we ensure that your real estate transactions are secure, legally compliant, and successful.
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