On May 27 th , 2024, the Government of Ontario introduced new legislation that would strengthen protections for homeowners.

The Homeowner Protection Act, 2024, would ban the registration of Notices of Security Interests (NOSIs) for consumer goods and deem NOSIs for consumer goods currently registered on title to be expired.

This legislation aims to protect consumers from fraud and bad actors. Investigations have revealed that some bad actors have leveraged these registrations to demand substantial payments from the consumers which at times resulted in homeowners, predominantly the elderly and the financially vulnerable, losing their properties. The number of NOSIs registered has increased dramatically, in the past they were rarely used, approximately 2,000 a year, to more than 58,000 such registrations in 2023.

A Notice of Security Interest is an instrument that is registered on title to a property, as security for the contract that is entered into between the homeowner and lender or consumer good supplier. Very often the homeowner was not informed or did not understand that a NOSI would be registered on title. The substantial difference between a NOSI and a mortgage, also known as a Charge, being registered on title, is that the homeowner must sign the actual mortgage/charge document that is going to be registered on title, therefore, the homeowner would see the terms of the charge/mortgage. They would see the principal amount, the interest rate, the term length etc. Whereas with a NOSI, the fact that it is going to be registered on title is, most often, hidden somewhere in the contract. Plus, the homeowner does not have to sign the NOSI to agree to it being registered on title. The fact the homeowner signed the contract allows for the NOSI to be registered. Thus, the homeowner would not see the terms, as spelt out in a mortgage/charge.

NOSIs most often come to the attention of a homeowner when they are informed by their real estate lawyer when they attempt to sell or refinance their property. An example of when a NOSI would be registered on title occurs when a homeowner has entered a contract to finance a furnace, air conditioner, windows, or other appliances or fixtures that are attached to the house.

The Homeowner Act, 2024, will eliminate all NOSIs which are currently in place which amounts to around $1 billion according to the Minister of Public and Business Service Delivery. The bill will deem all NOSIs for consumer goods currently registered on title to be expired.

However, the proposed changes do not eliminate a business’ security interest in the appliances or invalidate their contract with the consumer or renter. If defaulted, the business may still be able to repossess and seek repayment through other means including the courts. The change will just remove the registration from the title of the homeowner’s property.

A concern with the removal of these NOSIs is that as real estate lawyers, we search title and this is when these NOSIs are discovered. If these NOSIs are no longer on title, there would be no way for a real estate lawyer to know about such registrations. Plus, a concern for realtors is that they would need to know if any of the items on the property are financed so they can ensure to include a clause in Schedule A of the Agreement of Purchase and Sale protecting their clients.

Here is a sample clause:
It is a condition of this Offer that the chattels and fixtures are paid in full and free and clear of any security interests.

A further concern occurs where an unscrupulous seller does not disclose the existence of a financed consumer good on the property. Understandably the goal with this legislation is to protect homeowners. However, by removing NOSIs from title, the result is that it will shift the potential for exploitation to the home buyers and liability to realtors.

At Rabideau Law, as a believer in advocating for positive change, we reached out to Matthew D’Amico of the Minister’s Office to suggest the creation of a NOSI directory. If the NOSI is not to be registered directly on the property, the government should create a directory where a property could be searched to see if there are any financed items that have not been paid off in full. The failure to do such is going to result in many post-closing issues, unhappy buyers and realtors taking the brunt of the blame.

Author: Geoff Rabideau, Principal Lawyer, Rabideau Law