We are looking for support from fellow members of the Ontario Real Estate Bar to petition the Ontario Government to abolish Notices of Security Interest (NOSIs) and Lodgements from the registration system (with retroactive effect). 

Should you support the initiative, please sign and circulate.

 

Todd McCarthy, MPP

Minister of Public and Business Service Delivery

777 Bay Street, 5th Floor, Toronto, Ontario M5B 2H7

Re:  Open letter to the Ontario Government; call for prohibition and retroactive removal of Notice of Security Interests and Lodgements

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We are members of the Ontario Real Estate Bar, writing as experts in our field and on behalf of thousands of Ontario homeowners who are dealing with the very real threat of losing their homes. We have observed a considerable increase in the prevalence of companies offering long-term leasing and financing arrangements for home equipment and renovations, often sold door-to-door, without due regard for the end consumer. We are advocating that this matter be regarded with heightened concern and prioritized for legislative review by the Ontario Legislature. 

The Problem:

The registration of notice of security interests (NOSI) or Lodgements against title ownership of vulnerable homeowners in Ontario, often in respect of unwanted and overpriced home services and equipment, has escalated to the point where it is openly and brazenly being abused. The victims of these predatory practices are elderly homeowners who are socially isolated with limited financial means, deliberately targeted due to their social and demographic profile.

NOSI and Lodgement registrants have an unfair advantage over homeowners when it comes to negotiating disputed contract cancellations. The advantage is directly caused by the vendor’s ability to register a NOSI or Lodgement on a homeowner’s title in instances where equipment has purportedly been installed. This imposes an enormous burden on homeowners, since mortgage lenders and purchasers require NOSIs and Lodgements to be removed from title before completing a transaction. The properties are effectively held hostage, and the victims are forced or extorted to pay the amount the registrant claims to be owing, regardless of whether that sum is legitimate or not. Despite no lawful authority to do so, the vendor or registrant often charges exorbitant fees, interest, and penalties to cooperate and release a homeowner’s title. 

The Ontario Real Estate Bar has collectively witnessed thousands of distressed homeowners who have less than a week to clear thousands of dollars in NOSIs they never knew existed; failing which, these homeowners risk defaulting on loans or being brought to court over failing to clear these instruments from their title. The real estate litigators that are signatories to this letter can attest to the rampant misuse of NOSIs and the devastation they cause on what should otherwise be a simple real estate transaction. 

NOSIs/Lodgements - Gateway to Mortgage Fraud:

While problematic in their own right, as outlined above, the NOSI and Lodgement also serve as a gateway to mortgage fraud amongst vulnerable Ontarians. Older adult homeowners are approached by individuals who make repeated visits with false promises of “rebates” or “free” renovations if they sign documents presented to them on their doorstep. The older adults are pressured to sign immediately, without being given time to read the documents, or even left with a copy for their own records. Often these documents turn out to be loan and mortgage contracts. 

Homeowners later discover that a private mortgage has been placed on their home with unfair terms including high interest rates (up to 25%); high brokerage, referral and lenders’ fees; and prepayment of interest for up to a one-year term (making the mortgage difficult to discover until it becomes due). There is no recourse for the victims other than to pay out these registered mortgages; this leaves the homeowner no choice but to sell or further mortgage their home in order to pay out these contracts. 

Recently and in light of the growing number of fraudulent NOSIs, Lodgements and mortgages, Ontario title insurance providers refuse to insure properties where there are several NOSIs registered on title. This renders the property both uninsurable and unfinanceable; leaving many homeowners no choice but default on these predatory loans and risk losing their homes, which many have already.

Solutions:

Revisions to Consumer Protection Act – Not enough

While the Ontario government restricted the door-to-door sale of many products starting in March 2018, the vast majority of predatory vendors remain undeterred. The Consumer Protection Act and its replacement, Bill 142 (an Act to enact the Consumer Protection Act, 2023) provides a ‘band-aid fix’ to the problems caused by NOSIs and the interested parties motivated to exploit and leverage its weakness as a legal instrument.

Enhanced consumer protection is certainly welcomed; however, the damage has already been done and we urge the Ontario Government to proactively intervene in preventing these predatory practices from continuing.  Homeowners affected by NOSIs and Lodgements are unable to navigate complex legislation. Rights of rescission are irrelevant when the homeowner discovers that they inadvertently entered into a consumer agreement more than one year prior. By this time, the NOSI has likely been assigned to a third party lender who claims they are an innocent bona fide purchaser for value. These bad actors are two steps ahead by the time any consumer protection legislation hits the floor. 

 Consultation Papers  - Disproportionate Sampling

With respect, consultation papers fail to adequately canvass and sample the Ontarians who are truly affected by NOSIs and Lodgements. It is unreasonable to expect Ontarians who are actually affected to read and respond to a forty-two page consultation paper. These same Ontarians have limited knowledge of ‘liens,’ ‘NOSIs’, etc. and do not have access or the means to obtain title and parcel searches. For many homeowners, they only become aware of these issues when they sell or refinance their property. What is worse is that many of these victims have limited to no physical or mental capacity. 

We speak for those victims and these homeowners. We represent hundreds of thousands of Ontarian homeowners of all ages impacted by the NOSI and Lodgement.

Outright Prohibition of NOSIs 

There is no other adequate solution other than a complete prohibition of NOSIs for all residential ownership. The Director of Titles has already prohibited Lodgements from December 31, 2022, stating “the Notice of Lodgement of Title is not an appropriate document type to be included in the real property registration system and will be discontinued.”  There is simply no place for the NOSI in the property registration system either. The NOSI is being used as a mini-mortgage, without scrutiny, and has become much more than a mere nuisance - it has become a vehicle for fraud.

Removing NOSIs undeniably evens the playing field amongst legitimate business interests. No other consumer goods sector allows for registration of unregulated security interests against title to property; why should HVAC and renovation companies be granted special rights to leverage title? There are other legitimate avenues for contractors to recover on unpaid accounts, such as litigating under the Construction Act.  Other vendors or suppliers can litigate in Small Claims Court under the normal course. This will force vendors and financiers to pull credit checks and run risk mitigation prior to lending equipment, leases, or financing long term debt to Ontarians who cannot service the same. 

We, as practicing real estate solicitors and members of the Bar, demand that NOSIs be abolished. The only viable solution to protect Ontario homeowners is to remove, via legislation, the ability to unilaterally encumber and leverage title through use of the NOSI or Lodgement.

Retroactive Removal of NOSIs and Lodgements from Title to Lands 

Regrettably the extent of harm already facilitated by way of these flawed instruments is already palpable. Vulnerable homeowners will remain unaware of the NOSI problem for many years to come (when they refinance or sell their property), which will only serve to compound this issue further. We demand that this Government not only prohibit NOSIs and Lodgements going forward but move to immediately delete, vacate, and abolish NOSIs and Lodgements from residential properties retroactively. There is no viable solution to this problem if we cannot resolve the damage done under the oversight of the Ontario Government.  

Again, this Government must be proactive, not reactive. Affected Ontarians need immediate and succinct reprieve from these predatory practices. Average Ontarians do not have the means necessary to fight these predatory notices ‘head-on’ and are left falling victim to these ongoing schemes. Should legislation not retroactively discharge NOSIs or Lodgements, this problem will continue for decades to come. Regrettably, prior governments permitted this problem to spread and proliferate, allowing bad actors to hone their deception and adapt to slow-moving legislative oversight; it is time to right those wrongs and set the record straight. The Ontario Real Estate Bar, sees this problem in real-time, on a daily basis. We urge the Ontario Government to avail itself and act on this urgent caution.

We welcome the opportunity to speak in further detail about this problem and our proposed solution.

 

 

References: 

https://www.cbc.ca/news/business/man-alleged-to-be-behind-high-interest-mortgage-scam-living-large-on-social-media-1.7036852​

https://www.cbc.ca/news/business/seniors-mortgages-marketplace-1.6795104