If you buy or sell a home in British Columbia, you are entitled to advance notice of anything that might affect your ownership or your property rights.
That notice extends to mortgages, easements, claims by former spouses, and anything else that can be registered against a title. In British Columbia this is done through the Land Title Office, an agency established by the Land Title Act, RSBC 1996, c.-250.
If you’ve purchased a home, you have likely seen a copy of your title, and will have noticed that every charge or notice registered on title has a date and time of its registration. That’s because the most significant feature of registration is knowing where you rank in priority to any other charge.
So how important is the priority system and what happens if you don’t register right away or make a mistake?
Those are the questions answered by the British Columbia Supreme Court in a pair of cases, Bank of Nova Scotia v. Titanich (Titanich), 2014 BCSC 1129 and Ryan Mortgage Income Fund Inc. v. Revesz (Ryan), 2015 BCSC 1734.
In Titanich, the property owner held title to four contiguous lots of land and granted a mortgage to the Bank of Nova Scotia. Although the bank and Ms. Titanich intended to mortgage all four lots, a bank mistake resulted in the mortgage being registered against title to only one of the lots. Several years after the mortgage was granted, Mr. Kozak asserted a claim in court against Ms. Titanich and filed a certificate of pending litigation against the property. Unlike the bank, Mr. Kozak’s counsel prudently searched the title system, found the four land titles, and registered the certificate against all four.
After discovering its error, the bank applied to Masters Chambers to have its mortgage be registered against all four lots in priority to Mr. Kozak’s. Master Young (as she then was) wrote in her decision, “Mr. Kozak . . . has reserved a priority spot on title by filing the certificate of pending litigation and is entitled to that position . . .”
Mr. Kozak’s due diligence paid off. The court found he was entitled to rely on the advance notice system found at the Land Title Office. Like the Monopoly card, it was a bank error in Mr. Kozak’s favour.
The B.C. Supreme Court followed the Chambers decision in the Ryan decision. The facts there were remarkably similar. Ms. Revesz borrowed $58,000 and granted a mortgage to Ryan Mortgage Income Fund Inc. (“Ryan”), and Ryan registered its mortgage. A few months later, Ms. Revesz borrowed an additional $25,000, and Ryan registered a second mortgage against the property. Two weeks after the second mortgage was registered, Ms. Revesz paid off the second mortgage, but Ryan mistakenly discharged the first.
Three months later, Ms. Revesz’s former employer filed a civil claim against her and her spouse, and allege an interest in her property because money they claim she owes them was used to acquire or maintain the property. In order to secure their claim, they filed a certificate of pending litigation against the property in order to reserve a priority spot.
At the time Ms. Revesz’s former employer filed its certificate of pending litigation, the only mortgage registered on title was the second mortgage for the lesser amount that was already paid off and should have been discharged. Even though it discharged the mortgage in error, Ryan could not substitute the registration of the larger mortgage for the smaller one that was still on title. Nor did the court allow its application for a declaration that its $58,000 mortgage would rank in priority to the certificate of pending litigation.
Although there was plenty of discussion about how much money would be available to satisfy all the expected judgements against the property, Justice Rogers determined all that discussion to be beside the point. “The issue is whether the certificate of pending litigation secures the priority position of Tostenson’s claim for an interest in the property,” he wrote.
As in Titanich, the court upheld the priority system established under the Act. “To enjoy the fruits of registration under the Land Title Act it is not necessary for a charge holder to prove that he would not have registered had he thought that some other charge might have priority over him,” wrote Justice Rogers.
In the case of the land title registration system, the certainty of title and the ranking of priorities is a cornerstone.
Bank of Nova Scotia v. Titanich, 2014 BCSC 1129 (CanLII)
Ryan Mortgage Income Fund Inc. v. Revesz (Ryan), 2015 BCSC 1734 (CanLII)
Paul Varga is a partner at Interior Law LLP
and practices in the areas of civil litigation and contract law.
He can be reached at: www.interiorlaw.ca