The Homeowner Protection Act, 2024: Ontario's New NOSI Ban and What You Need to Know

Overview

On June 6, 2024, the Homeowner Protection Act, 2004 came into force, which amended the Personal Property Security Act, ending the era of Notices of Security Interest (NOSIs) for consumer goods in Ontario.[1] The amendment has banned the registration of NOSIs for consumer goods—defined as goods used or acquired for use primarily for personal, family or household purposes.[2] Consumer goods include items intended for personal, family, or household use, such as furnaces, air conditioners, and water heaters.[3] Now, any consumer good NOSI registered against a property’s title before June 6, 2024 can be deleted.[4] With this ban, Ontario seeks to better protect homeowners from unexpected liens and make property transactions more transparent.[5]

NOSIs are registrations on the land registry system and can be made by a business when it rents, finances or leases fixtures installed on a property.[6] They were intended to protect business interests by preventing a property, containing its fixture, from being sold or refinanced unless the rental contract is paid out in full or “postponed” (allowing the new mortgage to sit in first priority).[7]

This legislative ban follows growing concerns of NOSI misuse in recent years.[8] Some bad actors have used NOSIs to extort exorbitant payments from homeowners and discourage them from changing service providers.[9] Since NOSIs are not a lien or a mortgage, businesses never had to inform a homeowner when they registered an interest against their title. Unfortunately, NOSIs were often discovered when homeowners tried to refinance or sell their property.[10]  Before selling, homeowners were threatened by large removal fees to delete the lien.[11]  Without enough time to dispute the lien with Consumer Protection Ontario or take legal action to have it removed, homeowners were forced to pay exorbitant removal fees. [12]

Importantly, the ban only invalidates NOSIs registered on title—it does not affect any existing contractual rights.  If a homeowner defaults, or otherwise breaches a rental contract, businesses may still repossess the fixture and pursue other repayment means, even legal action.[13]

Key Implications

1. Improving Real Estate Transactions

Ontario’s NOSI ban should reduce the complexity of residential property transactions.  Lawyers can provide clients greater certainty about the status of their property’s title.  Also, instead of NOSIs surfacing unexpectedly during title searches—delaying closings or creating disputes—lawyers can more easily delete them from title.

The Land Registry Office has released Bulletin-2024-12 explaining how to delete NOSIs from title.[14]  Lawyers can file the appropriate documents with the Land Registry Office including: (1) an Application to Amend the Register along with paying the associated fee; and, (2) a law statement confirming that the NOSI on title is for a consumer good and subject to the ban.[15]  Once filed and reviewed by the Land Registry Office, the NOSI will be deleted.

2. Protecting Homeowners

In eliminating NOSIs, vulnerable homeowners— including the elderly, new Canadians, and those facing language barriers—will likely benefit from greater protections against unregistered liens and title scams.[16] However, homeowners should remain aware of their ongoing contractual obligations.  The NOSI ban does not absolve homeowners from their rental contracts and any breach of contract may result in legal action against them.

3. Risk Management Considerations

To help clients navigate Ontario’s new NOSI ban, lawyers should consider the following:

• PPSA Search: Lawyers should conduct a PPSA search to identify any rented fixtures and review the purchase agreement to confirm if the seller must buy out the equipment or the buyer assumes rental payments. PPSA searches are available online at Service Ontario, and LAWPRO has published a practical guide with instructions on searching and registering.
• Clear-up Title: It is good practice to ensure that any pre-existing NOSIs have been removed.
• Advise on Continued Contractual Obligations: Explain to clients their ongoing responsibilities under existing rental contracts with businesses.
• Guard Against Facilitating Dishonest Conduct: Do not act for businesses attempting to charge homeowners large NOSI removal fees.

• Prepare for Increased Disputes: As businesses may seek to enforce valid rental contracts, litigation lawyers may see a rise in cases related to nonpayment or breach of contract.

Clarifying Responsibility for Deleting NOSIs

While Ontario’s NOSI ban aims to protect vulnerable homeowners, there is still some uncertainty—who is responsible for deleting NOSIs from title in a property transaction? Little guidance is offered by the Personal Property Security Act as to who is responsible for deleting NOSIs during a property transaction.  Its relevant part states that NOSIs “may be deleted from title by registering an application in the proper land registry office. . .” As such, homeowners have discretion to remove NOSIs—but are not required to do so.

Similarly, standard Agreements of Purchase and Sale (APSs) do not exactly resolve the question of responsibility. Typically, APSs contain a section on rental items that reads: “The following equipment is rented and not included in the Purchase Price. The Buyer agrees to assume the rental contract(s) if assumable....” [17]  This suggests that the seller’s lawyer must remove NOSIs at the seller’s expense, unless the buyer assumes the rental contract.  However, if the buyer assumes the rental contract, confusion arises as to who is responsible for deleting the NOSI from the title—the seller or the buyer.  The seller may argue that the buyer is assuming the rental contract, along with its rights and responsibilities, including paying for the removal of the NOSI.  Yet, the buyer may argue that the seller has the responsibility to clear all NOSIs before closing.  In this case, the buyer is likely most responsible for deleting the NOSI, as it is linked to the rental contract they agree to take on.  In assuming the rental contract, the buyer takes on the responsibility to remove NOSIs at their own cost, unless the APS says otherwise.

Due to this confusion, some lawyers have suggested that the Ontario Real Estate Association (OREA) amend their standard APSs to clarify responsibility for deleting NOSIs.[18]  In the meantime, they suggest using clear language, such as: “The Seller agrees, at their sole expense, to remove all Notices of Security Interests from the title by registering the necessary application(s) to delete same on or before the closing date.”[19] Hopefully, specific clauses in APSs will clarify who is responsible for deleting NOSIs.

Conclusion

Recent changes to the Personal Property Security Act now prohibit NOSIs for consumer goods in Ontario. This ban seeks to protect homeowners from unexpected liens and make property transactions more transparent.  Lawyers can delete registered NOSIs by applying to the Land Registry Office.  However, the ban does not invalidate contracts, and homeowners must still honour their existing contractual obligations.  Further clarification is needed to determine who is responsible for removing NOSIs during property transactions—the seller or the buyer.  According to standard APSs, the seller must remove NOSIs before closing, unless the buyer assumes the rental contract.  Ultimately, the answer likely depends on the parties' intentions and the specific clauses chosen to structure the transaction and clarify responsibilities.

Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.