Court rejects false chain of title and restores land to rightful owner

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In Ontario, land registration operates under two distinct systems: the Registry system and the Land Titles system, each governed by separate statutes and principles. The Registry system, established under the Registry Act, records instruments affecting land but does not guarantee title. It functions as a notice-based system, where the validity of ownership depends on the chain of title and the legal effect of registered documents. In contrast, the Land Titles system, governed by the Land Titles Act, is based on the “Torrens” model and provides a state-guaranteed title. Under this system, the government certifies ownership through a centralized register, and the registered title is deemed conclusive, subject only to limited statutory exceptions.

The Land Titles system simplifies conveyancing by eliminating the need to investigate historical title documents, whereas the Registry system requires such investigation to confirm ownership. The Land Registration Reform Act harmonizes procedures between the two systems but maintains their legal distinctions. Over time, Ontario has been converting properties from the Registry system to the Land Titles system to enhance certainty and efficiency in land transactions.  Ultimately, the Land Titles system offers greater protection and reliability, making it the preferred model for modern land registration in Ontario.

Over 90% of Ontario's privately owned land has been converted from the Registry system to the Land Titles system. This conversion has been part of a long-term modernization initiative led by the Government of Ontario aiming to streamline and secure land registration processes. The transition began in earnest in the 1990s and was guided by recommendations from the Ontario Law Reform Commission, which concluded that the Land Titles system was superior in nearly every respect.  The conversion process involved "parcelizing" land records – assigning each property a unique Property Identifier Number (PIN) and creating a computerized Parcel Register.

Today, almost all properties in Ontario are registered under the Land Titles system, with only a small fraction remaining in the Registry system. These remaining “Registry Non-Convert” properties are typically more complex or have unresolved title issues that prevent immediate conversion.  For example, unclear boundaries, missing documentation or conflicting ownership claims are reasons why some properties were never administratively converted to the Land Titles system.  Where there is a problem with a property description that is holding up conversion, a landowner must often obtain a new reference plan of survey for a property as a condition of converting to Land Titles.

Some properties left in the Registry system have been the targets of fraudsters.  “Project Perspicarious” was the name allegedly given by an Ontario realtor to his fraudulent scheme aimed at acquiring ownership of unregistered or ambiguously titled properties still in the Registry system.  According to sworn evidence from a former employee of the realtor’s firm, the scheme involved identifying parcels of land that had not been converted to the Land Titles system and appeared to lack a clear registered owner.  The employee described the realtor’s process of registering “rogue deeds” – documents purporting to transfer ownership between associates or shell parties to fabricate a chain of title.  The goal was to eventually have the property conveyed to the realtor himself, thereby creating the appearance of legitimate ownership.  

The scheme relied on exploiting gaps in the Registry system, particularly the “forty-year rule” under the Registry Act, which allows title to be established by tracing ownership back four decades. By inserting fraudulent instruments into the Land Registry, the realtor aimed to satisfy this requirement artificially. He allegedly planned to profit by selling the properties or, if challenged, to seek compensation through the Land Titles Assurance Fund or private title insurance.

The story of “Project Perspicarious” is described in a recent decision of the Superior Court of Justice in a case fought between the realtor and a Conservation Authority.  The Authority brought a claim for declaration of title to a Registry Non-Convert property that it had acquired back in 1973 and over which it had since maintained possession and control. The realtor contended that he owned the land based on a chain of transfers beginning with a quitclaim deed from “Mr. P.” in 2013, but the Court ruled that “Mr. P.” had no title to give to the realtor in the first place and, “[t]he quality of title in the subsequent deeds is only as strong as the weakest link in the chain of title starting with the quitclaim deed in 2013.”  The Court drew an adverse inference against the realtor for having failed to call “Mr. P.” as a witness or to provide any evidence from him: “The source of title in the quitclaim deed of [Mr. P.] would have been key evidence in this case, and [Mr. P.] would have been the witness to give it.”

Properties in Ontario that remain in the Registry system face several legal and practical risks. Unlike the Land Titles system, which guarantees ownership and provides a centralized, authoritative record, the Registry system merely records documents without verifying title. This means ownership must be proven through a chain of title, often requiring a 40-year historical search. If any link in that chain is missing, unclear, or fraudulent, the property may be vulnerable to competing claims. Registry properties are also more susceptible to title fraud, as rogue deeds can be registered without rigorous verification. Administrative errors during conversion to Land Titles may leave some parcels unconverted, creating confusion over ownership and boundaries. Additionally, Registry properties may be excluded from certain protections under the Land Titles Act, such as assurance fund coverage. As these risks can complicate sales, financing, and development of land, landowners are well advised to investigate the status of any properties still in the Registry system and the possibility of conversion to Land Titles.

Read the decision at: 2025 ONSC 3090 (CanLII).

 

Caveat Emptor and Recission of Agreements of Purchase and Sale

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The centuries-old doctrine of caveat emptor – “let the buyer beware” – continues to play a significant role in real estate transactions in Ontario and beyond.  Buyers are expected to conduct their own due diligence before entering into an Agreement of Purchase and Sale (“APS”).  The buyer is free to avoid running into problems with a property either by choosing not to sign the deal or by negotiating conditions within the APS that will allow the buyer to walk away.  However, there are still circumstances where a buyer may seek to rescind an APS (the remedy of “recission”) in spite of caveat emptor.  For instance, where a buyer purchases a property for an intended use and information arises after the agreement is made that materially affects that intended use, the buyer may still have room to avoid completing the deal depending on the seller’s conduct.  While sellers are not obligated to disclose all potential issues about a property, silence on an issue can in some cases amount to an actionable misrepresentation.

A recent Superior Court decision examined the remedy of recission in connection with a buyer’s disappointed expectations about a property’s development potential.  The buyer entered into an APS in May, 2025 for a vacant lot in Toronto’s Bridle Path community. The property was advertised as a prestigious location to build a custom dream home.  After signing the APS and submitting a $150,000 deposit, the buyer discovered a restrictive covenant registered on title that limited development to a single detached dwelling. This restriction conflicted with his intention to develop the property into a multi-unit townhouse or condominium.  Initially, the buyer had included a due diligence clause in his offers, allowing him to investigate the feasibility of development.  However, he removed this clause in the final, unconditional offer accepted by the seller.

The restrictive covenant had been registered in 2023 and was discoverable through a title search.  It provided as follows:

Only one single detached house may be permitted to be constructed on each of Parcel 1 and Parcel 2, and no application shall be made by the Owners to rezone either of Parcel 1 or Parcel 2 nor shall any of the Owners make application to the Committee of Adjustment of the City of Toronto or such other authorities, municipal or provincial, to permit more than one single detached house to be constructed on each of Parcel 1 and Parcel 2.

These restrictive covenants shall expire thirty-five (35) years from the date of registration of this Application to Annex Restrictive Covenants, and shall have no force or effect thereafter.

After discovering that he would not be able to redevelop the lands for multi-residential use, the buyer applied to the Court to rescind the APS and order the return of the substantial deposit he had paid. The scheduled closing date for the transaction was July 18, 2025.  The application was heard on July 15, 2025.  The buyer argued that the restrictive covenant materially affected his intended use of the property and that the seller should have disclosed it to him.  The evidence was that the buyer had not made his multi-residential intentions known to the seller until after the APS was signed.  The seller had advertised the property as a prime lot for building a single detached house – “Your custom Dream Home”.  The seller made no representations that anything could be built on the property other than a large single home.

Justice Leiper of the Superior Court dismissed the application in a decision issued the day following the hearing and just two days before the scheduled closing date.  She accepted that the buyer was taken by surprise in learning of the restrictive covenant.  However, she disagreed with the buyer’s contention that the seller should have told him of the existence of the restrictive covenant because of the price he paid for the property ($2.3 million), the nature of the property, and the local trends in multi-residential development in that particular area of Toronto.  Justice Leiper noted that the buyer did not ask the seller whether there were any limitations on development: “The Seller was not required to actively inquire into the [Buyer]’s intentions or to divine from the negotiated price that the Seller must have had a certain kind of development in mind.”

In the end, the circumstances of the transaction did not displace the doctrine of caveat emptor.  Justice Leiper explained:

Given the price paid for this land and the Purchaser’s plans to act as the developer of townhouses there, I infer that he is not an unsophisticated party. He could have inserted terms into the APS to protect himself from registered restrictive covenants that might interfere with his plans. His initial offers included a condition that permitted time to exercise due diligence and find out if the property could be developed in a way that was “economically feasible.” He chose to remove this condition, and in doing so, he accepted a measure of risk. Perhaps he thought he was getting a bargain by purchasing this amount of land for the price, making it worth the risk. Having discovered after the fact that there was a registered restrictive covenant on title, he now asks the court to relieve him of the bargain that he made in clear terms, and having turned his mind initially to an alternative means to protect his financial interests. The doctrine of caveat emptor applies: the Purchaser chose not to exercise caution that he knew was available to him to insist upon or forego the purchase.

 Read the decision at: 2025 ONSC 4210 (CanLII).

Drainage Petition Fails Over Area Requiring Drainage

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New municipal drains in Ontario are created by “petition” made to the local municipality.  Pursuant to Section 4 of the Drainage Act (the “Act”), petitions may be made by the majority of the number of landowners in an “area requiring drainage”, by any one owner who owns at least 60% of the land within that area, by the municipal engineer or road superintendent where a municipal drain is required for a road, or by the “Director” appointed by the Province in the case of drains required for agricultural purposes.  Where the municipality accepts the petition, it appoints a drainage engineer and that engineer must prepare a report for the proposed drain.  The report includes the design and specifications of the drain as well as a table of assessments in which each participating landowner’s respective share of the costs of the drain is assigned.

Section 5 of the Act requires a municipal council that receives a petition to consider the petition forthwith and to decide whether to proceed or not to proceed with the drainage works.  Where the municipality decides to proceed with the works, the municipality must appoint an engineer to examine the area requiring drainage and to prepare a report for the proposed drainage works.  Pursuant to Section 9 of the Act, before making the examination and report, the engineer must hold an on-site meeting with landowners within the area and shall at the meeting: (a) determine the area requiring drainage; (b) determine whether the petition complies with Section 4 for the area requiring drainage; and, (c) where the engineer is of the opinion that the petition fails to comply with Section 4, establish the requirements for a petition to comply.

The term “area requiring drainage” is not defined in the Act. Once an engineer has been appointed by the municipality, in order to determine the validity of a petition brought by a private landowner(s), the engineer must make his or her own identification of the area requiring drainage (which may differ from the area described in the petition) and of the property(ies) lying within that area.  The Drainage Act requires this confirmation of compliance with Section 4 because the legislation compels area landowners to participate in (and pay for) municipal drains.  Only a landowner or landowners with a sufficient ownership interest in the “area requiring drainage” can compel non-petitioning neighbours to accept a municipal drain.  The proper determination of the sufficient ownership interest places an important limit on this forced participation.

The Drainage Referee, who is a judge or a lawyer appointed by the Ontario Cabinet, is given jurisdiction under the Act to determine the validity of a petition, effectively creating an appeal from the engineer’s determinations about the area requiring drainage.  A recent decision of the Acting Drainage Referee for Ontario dealt with such an appeal.  The Acting Referee noted in his decision:

It is essential to determine an area requiring drainage in order to be able to apply those percentages and thus test for the validity of a petition. Once the area requiring drainage has been determined, the rest is a mathematical calculation. However, if an area requiring drainage is determined solely and simply based on the owner of a single property’s desire for a legal outlet, then what is the purpose of Section 4 of the Act? The legislature knows how to create laws that allow for single-person initiation, as in Sections 78 and 79 of the Act. However, it has not done so in relation to the establishment of new municipal drains. Careful attention is therefore required in the determination of an area requiring drainage to preserve the integrity of section 4 of the Drainage Act.

In the case before the Acting Referee, a single landowner had signed a petition for a new municipal drain to address a “low depressional area” located in part on the petitioner’s property but mainly on the neighbouring property.  The neighbouring owner did not sign the petition.  The engineer prepared a report for the proposed municipal drain and identified the property owned by the petitioner as the area requiring drainage (being the area within which the owner planned to install a systematic tile drainage system).  The questions for the Acting Drainage Referee were whether the engineer was correct to define the area requiring drainage by reference to property ownership boundaries and whether it was correct to exclude the neighbour’s property from the area requiring drainage for purposes of Section 4 of the Act.

The Acting Drainage Referee did not foreclose the possibility that ownership boundaries might be relevant in some circumstances to the determination of the area requiring drainage, but found in this case that ownership boundaries should not have formed the basis for the engineer’s determination.  Further, the engineer was wrong to exclude the neighbour’s portion of the “low depressional area” from the area requiring drainage.  The engineer had suggested that the neighbouring land should be excluded because it had existing riparian access to an outlet (a nearby creek).  However, the Acting Drainage Referee found that the portions of the low area on both sides of the property line had “technical access … for outlet” and neither had “reasonably feasible riparian access to that outlet.”

The result of the Acting Drainage Referee’s findings was that petition was invalid because it was not signed by 60% of the landowners of the area requiring drainage.  The engineer’s report was set aside and the municipality’s provision drainage by-law was quashed.  As the Acting Referee concluded:

The Engineer is entitled to great deference with respect to the question of the area requiring drainage for the purposes of section 4 of the Drainage Act, and his conclusions ought not to be disregarded except when there is clear evidence of error or unless a question of law is involved. But if his conclusion is patently wrong, it cannot stand.

Read the decision at: 2025 ONDR 5 (CanLII)

Zombie Deeds (yes, Zombie Deeds)

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Imagine the following scenario: Party X has entered into an Agreement of Purchase and Sale to sell her property to Party Y; all of the conditions of the sale have been fulfilled or waived; title searches have been completed; the closing date is next Monday; Party X comes into her real estate solicitor’s office on Thursday and signs all of the required closing documentation including an Authorization, Acknowledgement and Direction to her solicitor authorizing the solicitor to register an electronic Transfer/Deed in the Land Registry conveying ownership of the property to Party Y once the purchase funds have been received; Monday arrives and, sadly, Party X passed away over the weekend.  Party X wanted to complete the sale to Party Y and, indeed, was obligated to complete the sale to Party Y.  She already authorized her solicitor to register the Transfer/Deed to make that happen.  Can Party X’s solicitor not register the deed in accordance with the client’s wishes and obligations?

The answer is “no”.  If the real estate solicitor went ahead and attempted to register the Transfer/Deed on the basis of the Authorization, Acknowledgement and Direction signed by Party X before her death, the solicitor would be attempting to register what is commonly (and maybe a bit flippantly) referred to as a “Zombie Deed”.  For several years now, the Land Registry in Ontario has expressly prohibited the registration of such deeds on the basis that the authorization to register terminates when the vendor dies.  The late Director of Titles for Ontario, Jeffrey Lem, issued a bulletin in May, 2020 titled “Zombie Deeds are Dead!” with the following introduction:

As most of you know, the Director of Titles has always been opposed to the so-called “Zombie Deeds” – transfers registered by owners who have already died. Well, there is finally a case dead on point (pun intended) confirming that Zombie Deeds are improper in all circumstances.

Mr. Lem went on to discuss the decision of Madam Justice MacLeod-Beliveau of the Superior Court of Justice in Thompson v. Elliott released in March, 2020.  Justice MacLeod-Beliveau had confirmed that it is never appropriate for a solicitor to register a Zombie Deed:

I find the lawyer erred by registering the "zombie" deed/transfer severing the joint tenancy in the property after Ms. Elliott's death based on his erroneous understanding that her instructions survived her death. A court application for a declaration of an interest in land is the proper legal procedure to follow by the lawyer to correct the error made by the lawyer after her death.

The proper course of action to be taken by a lawyer in these circumstances upon the discovery of such an inadvertent error, is for the lawyer to bring an application in the Superior Court of Ontario requesting a certificate of pending litigation and a declaration of an interest in land and for a vesting order under s. 100 of the Courts of Justice Act, R.S.O. 1990, c. C.43 to be made, setting out all the material facts in support of the application for an interest in land to be determined by the court.

Despite the clear statements from Justice MacLeod-Beliveau and the Land Registry about how solicitors should handle Zombie Deed scenarios, problems still arise.  In April this year, Justice Myers of the Superior Court made an interim decision in a case that calls into question the direction to seek a vesting order as the alternative to attempting to register a Zombie Deed.  A woman on her deathbed transferred title to herself and her nephew as joint tenants.  The woman’s solicitor visited her in the afternoon and had her sign the transfer documentation.  She passed away before the documents were submitted for registration the following morning.    Following the direction of Justice MacLeod-Beliveau in Thompson v. Elliott, the aunt’s estate applied to the Court for a vesting order to permit the registration in the Land Registry of the conveyance of title from the Estate to the nephew.

Justice Myers identified a unfortunate problem with the vesting order request: “Here, the nephew holds title to the property at law. There is nothing for me to vest in him. … I do not understand a request for a court to vest title in the person who already holds it.”  By law, the nephew had become joint tenant with his aunt when the documents were signed and he took title by operation of the law of survivorship when his aunt passed away.  The vesting order was sought as a way to deal with the requirements for registration of the conveyance of ownership and the prohibition of the registration of Zombie Deeds.  If a vesting order is not available, what is the solution?

Justice Myers ended up adjourning the application before him to allow counsel to provide further legal authorities and also perhaps to serve the Director of Titles with the application.  Real estate solicitors across Ontario will no doubt await with bated breath the solution to this difficult situation.

Read the decision at: 2025 ONSC 2661 (CanLII)

Farm bridge collapses beneath sprayer - who is at fault?

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In 2017, a custom sprayer operator from a local farm supply company was crossing a private bridge on a farm with a self-propelled sprayer when the bridge broke.  The sprayer fell into the river that ran beneath the bridge.  The operator was trapped underwater but managed to escape his machine.  The sprayer sustained very significant damage.  Over the course of 11 days in 2023 and 2024, a trial was held in the Superior Court of Justice to determine who was at fault for the incident and what compensation might be owing for damage to the sprayer.  A decision was rendered at the end of March this year.

The sprayer involved in the case weighed over 15 tons when empty and had 100-foot booms.  It had been purchased in 2014 for just under $343,000.  The operator of the sprayer was a long-time employee of the farm supply company and had operated the sprayer (and only that sprayer) for four years.  He had finished spraying one field on the customer’s farm and was moving to another field across the bridge when the collapse occurred.  The sprayer was about two-thirds of the way across when wooden planking broke beneath the sprayer’s front right tire.  The sprayer rolled completely and landed upright in the deep river below.  The cab was submerged and quickly filled with water, but the operator found a way out.  He escaped with cuts to his hands from broken glass.

The farm bridge had originally been constructed in the early 1900s by the same family that owns and operates the farm today.  In 1980, the bridge was rebuilt with concrete abutments placed at each end of the bridge.  The river was spanned using five steel beams spaced to create a supporting structure 10-feet-wide.  A wooden deck was placed over the beams with wooden planks running parallel with the beams on each side of the deck to hold the deck together.  In all, the wood deck stretched 57 feet from one side of the river to the other.  The deck extended in an overhang of approximately 3 feet beyond the edge of the steel beams on each side of the bridge.

No building permit was required for the bridge; the only legal requirement for the private bridge was that it be high enough above the river to allow water to pass under the bridge if the river flooded.  The unchallenged evidence of the farm family was that the bridge was crossed between 40 and 50 times a day by large-sized farm equipment weighing from 15 to 40 tons. 

After the bridge collapse, the sprayer sat mostly submerged in the river for 10 hours.  It was extricated from the water and taken back to the equipment retailer for an assessment of the damage to the machine and an estimate of the cost of repair.  A consultant engaged by the insurer for the farm supply company didn’t believe the sprayer was a write-off; he thought the unit could be repaired for roughly $332,000 including taxes.  The cost of a new replacement sprayer was over $435,000.  The insurer gave the farm supplier the following options: 1) repair the sprayer; 2) purchase a replacement sprayer of similar value to the damaged sprayer; or, 3) take the estimated cost of the repairs and apply it to the purchase of a new sprayer.  The farm supply company chose the third option and purchased a new sprayer.

Having paid out the estimated cost of repairing the damaged sprayer, the insurer for the farm supply company had a right of subrogation meaning that it could now pursue a claim to recover the money it had paid out.  The insurer sued the farm corporation that owned the bridge, claiming that the farm was at fault for the collapse because: the overhang was unsupported; the bridge was in a state of disrepair including rot; the wooden deck was free to shift over the steel beams; and, there was no warning that the overhang of the wooden deck was unsupported.  The farm corporation defended the action arguing that the incident was caused by driver error.  Provided that a vehicle was kept centered over the steel beams, the farm corporation contended that the bridge could support equipment much heavier than the sprayer had been at the moment of the collapse. 

The Court sided with the farm corporation and ruled that driver error was the cause of the incident and of any losses suffered by the farm supply company.  Although there was evidence of some rot in the wooden deck of the bridge, the bridge did not break at the point of the rotted wood.  Instead, the bridge broke only where the sprayer tire reached a point two-thirds across the overhang.  If the tires had been centered on the beams, the bridge would not have collapsed whether the wood on the overhang was rotten or brand new.  The Court found that the likely explanation for the sprayer veering toward the edge of the bridge was driver inadvertence.  A warning to keep the machine in the centre of the bridge and off the overhang wouldn’t have helped: the sprayer operator already knew he needed to keep the vehicle centred when crossing the bridge.  The insurer’s subrogated action for damages was dismissed.

Read the decision at:  2025 ONSC 1996 (CanLII).