Land Titles and Deeds-- Land Transfer Tax and Other Matters

Land Titles and Deeds-- Land Transfer Tax and Other Matters

Including Privacy of Information, Liens and Slander on Title

All deeds for real property in Ontario are kept, in writing, in the Land Titles Office. These deeds are open to the public and contain much of the history of real property in the Province. This written history of land ownership has been in continuous use in Britain, where the practice of written deeds began, for centuries.

For the real estate industry, land titles offices around the globe make for a rich source of knowledge. Not only will the record of deeds show things like who bought and sold the property over the years, it will show the price paid for the property, as well. It will also show things like any liens that have been placed on the property, any mortgages, power of sale orders or other types of claims registered on title.

For example, if a contractor has not been paid for a job, he or she can register a construction lien against the property and that property can not be sold or hypothecated (mortgaged) until the claim has been dealt with. This is a powerful tool for the construction trades and is the equivalent of the 'nuclear bomb' method of collecting unpaid or over due accounts.

Owners and developers can dispute the claim in court but this is a time consuming process. They are often left with little choice but to pay the claim out so that they can sell their property or get a progress draw on a construction mortgage, for example. Another approach is to pay the full amount of the claim into court, have the lien lifted by the court and carry on the dispute through either a mediated process or litigated process. This should allow the sale or construction to proceed regardless of the future status of the lien claim.

Of course, if you are going to lien a property (and now even Architects are allowed to lien in Ontario for unpaid accounts), you had better be right because you are creating a permanent record on the title. Liens are also a favourite weapon of Governments at all levels in their effort to collect unpaid taxes.

These might not be just municipal taxes—any unpaid amounts such as income taxes, value added taxes, withholding taxes, basically anything that you owe or are said to owe to government can be registered by them (often ex parte; i.e., without you being present or even knowing that they have done it) on title.

Obviously, the amount claimed must be claimed against the exact same entity that is on title. That is, if Mary Smith is the owner of a piece of land or a house but her spouse, William Smith owes back taxes, the Government can not register a lien on Mary's property to collect William's back taxes.

In any case, if anyone wrongly registers a lien of any type against a property, this is called slander on title because, basically, you have created a permanent slander against the owner of the property. This could affect the owner's credit rating and have other serious ramifications. So you need to use this tool carefully.

Even consultants who are unpaid will sometimes use this approach in an effort to get paid. They can register their consulting agreements on title-- it's not a lien, per se but it does create a shadow on title and warns prospective purchasers that there is some kind of a dispute over fees that could affect this property. Generally, this is a LONG TERM approach to getting paid...

The only way to get rid of a slander on title is to apply to the courts for its removal. Only a court order allows the Land Titles Office to remove information from the public records. So if you slander someone’s land title, you could be on the hook for the costly judicial process of removing it.

Because the Land Titles Office has a record of amounts paid for property, real estate professionals make substantial use of this information in order to negotiate a better deal for themselves or their clients. They say things like: “You only paid X dollars 18 months ago, why should we pay you X + Y now?” Of course, what someone paid for a property 18 months ago isn’t really relevant in today’s marketplace—a price is, after all, whatever a willing buyer and seller agree to at any one moment. Still, it doesn’t stop people from trying to use historical information in these types of negotiations.

Rich folks often don’t like it when the price they pay for property can become known to the public and the media and they will go to great lengths to try to hide this information. They will purchase property through holding companies with nominee directors (say, their lawyer, for example) to hide the real identity of beneficial owner.

I asked Sally Burks, a lawyer in Ottawa, how one could go about disguising the purchase price for property in Ontario because I know some of my clients have managed to do that over the years.

Here is what Sally found out:

“Bruce:

I have now confirmed with the (Ontario) Land Transfer Tax Section that the option you outlined in your e-mail is still available. The purchase price will not show up on the electronically registered Transfer if the correct procedures are followed and the land transfer tax is paid directly to the Land Transfer Tax Section. It is possible, however, to obtain the information regarding the purchase price from the Land Transfer Tax Section because they consider this information to be public information.

Best Regards

Sally H. Burks

Perley-Robertson Hill & McDougall LLP

Barristers and Solicitors

www.perlaw.ca”

So basically, rich folks can hide the purchase price of their homes if they want to subject to someone determined enough to apply for the information under the Access to Information Act.