Treatment of Notice of Security Interest Registrations After Bill 200

A Notice of Security Interest (“NOSI”) is an instrument that can be registered against the title of your property to secure a debt obligation relating to certain equipment or fixtures. For example, if you sign a rental contract with an HVAC company for some air conditioning equipment, the rental contract might state that a NOSI may be registered on title. Registering a NOSI on title helps prevent an owner from selling the property without the creditor’s knowledge and ensures that the new owner is aware of the debt obligation. If a NOSI is discovered on title, the buyer’s lawyer will check the Agreement of Purchase and Sale (“APS”) to determine whether or not the buyer has agreed to assume that specific debt obligation. If the equipment was not disclosed as a rental item, the buyer does not have an obligation to assume the debt obligation, and the seller is responsible for paying out the rental contract. If the APS does disclose the rental item, then the buyer should assume (take over) the rental contract.

The Homeowner Protection Act, 2024 (Bill 200) (“HPA”) came into force on June 6th, 2024. The HPA amended the Personal Property Security Act (“PPSA”) to prohibit the registration of NOSIs if the collateral is consumer goods (with certain exceptions as provided by regulations that may be made by the Province). “Consumer goods” are defined in the PPSA as “goods that are used or acquired for use primarily for personal, family or household purposes.” Currently, there are no existing regulations associated with the HPA. Under the HPA, all NOSIs relating to consumer goods that were in effect immediately before the day the HPA received royal assent are deemed to have expired on June 6th, 2024.

One question for practicing real estate lawyers is: who is responsible for deleting these expired NOSIs from title? It’s not entirely clear yet. On the one hand, the NOSI is expired and therefore does not materially affect the title of the property. On the other hand, it is a registration on title representing a debt obligation (albeit expired) that the buyer has not agreed to assume. Notably, the Province of Ontario is warning consumers about a “scam to remove NOSIs from title” (see full warning below). The Province’s Website warns: “Homeowners are not required to remove [the NOSI] from their title, as they have no legal effect. Do not feel pressured to enter into any contract [to remove the NOSI from title].” Perhaps this comment from the Province sways the argument in favour of the position that sellers are not obligated to remove NOSIs from title, since the NOSIs do not affect quality of title in any way. Regulations from the Minister and further comments from the Land Registry Office will hopefully provide more clarity in the future.

Author:

Jennifer Park

Partner

e: jpark@realtycarelaw.com