Notices of security interest, known as NOSIs, are registrations that may be made on the land registry system by a business when it rents, finances or leases goods such as a water heater or furnace installed on a property. However, this once-legitimate tool has been significantly abused over the years, with many reports of businesses preying on seniors and other vulnerable people to sign contracts for home fixtures that contain a NOSI. Often, these homeowners are not aware a NOSI has been registered on their title, and businesses have charged them exorbitant fees to discharge them.
Earlier this month, the Ontario legislature unanimously passed Bill 200, the Homeowner Protection Act, which amended the Personal Property Security Act (PPSA) to ban the registration of NOSIs for consumer goods on the provincial land registry and deems all NOSIs related to consumer goods currently registered against titles to be expired as of June 5. The changes do not eliminate a business’s security interest in the fixture or invalidate its contract with the consumer — if the consumer defaults on payment, the business may still be able to repossess the fixture and seek repayment through other means, such as through the courts.
And now the Law Society of Ontario (LSO) is saying licensees must be alert to the risks of dealing with NOSIs, considering the new legislation and their professional obligations. The law society noted some lenders may still attempt to extract payments from individuals in relation to the NOSIs that are now deemed expired.
“Licensees must be on guard against facilitating dishonest conduct in transactions involving the enforcement of NOSIs or improperly paying out funds on the basis of NOSIs, whose registration has been deemed expired by the new legislation,” the law society said in a recently posted notice to the professions. “Failure to meet a licensee’s professional obligations, when acting for either a lender or a borrower in relation to a NOSI, can result in regulatory measures being taken against them.”
The law society has noted in the past that lawyers and paralegals have played a role in some of the predatory lending associated with NOSIs. It pointed to a recent publication from the Ontario government providing guidance on the changes.
Michael Lamb, counsel at Cohen Highley Lawyers
“The government has jumped in and done something really proactive to solve a major financial problem — I think it’s going to be effective because these scam artists that have been knocking on the door and getting people in their 80s to sign up for something they didn’t really want are going to go away,” said Lamb, who is also an adjunct professor of real estate law at Western University. “It’s not really going to be that big a deal for legitimate creditors, but it certainly will create a lot of problems for the scam artist.”
Sam Babe of Aird & Berlis LLP said that with the new legislation, lawyers are going to want to be careful to protect their clients, whether they are homeowners or mortgagees.
“The NOSIs are going to remain on-title until the homeowner hires a lawyer to bring an application to the register of land titles to have it removed. And the evidence that there was a NOSI will remain on title, just like any instrument — so when you purchase a property or mortgage it, and you do a land title search, it will still show a NOSI there,” he said. “They’re going to know that there might be a security interest in some of the fixtures, so it doesn't really put the owner in a different position.”
Lamb said the law society’s directives are really saying to lawyers that you can’t go “willy-nilly” in taking NOSIs off title — there still must be a legitimate reason for them to do so.
“You’re probably going to have to warn your clients that it’s not going to disappear overnight and even if I take it off your title, you can still be sued,” he said. “And of course, we’re already told as lawyers we have to make sure we’re not a dupe for the client — you can’t just have someone call you up and say, stick a NOSI on this property for me. You’ve got to have some due diligence.”
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