A caution is a legal mechanism that allows parties interested in land to register an encumbrance on title. Cautions can protect the interests of parties with entitlements to land. However, from an owner’s perspective, a caution can adversely affect or even prevent the ability to deal with the land.
When Cautions are Appropriate and How to Register Them
Section 71 Cautions
Broadly, parties can register cautions under section 71 of the Land Titles Act in three situations. First, parties to an agreement of purchase and sale (“APS”) may register a caution to preserve their rights under that agreement. Second, creditors may register cautions if a party conveys land with the intention to defeat creditors. Third, owners may register a caution if they assert that power of sale proceedings following a mortgage default were conducted improperly and the owner redeemed its interest in the land.
To register a caution pursuant to an APS, registration documents must state the APS closing date. The cautioner must authorize, the Land Registrar to remove the caution 60 days after the closing date. The cautioner must also submit the Land Transfer Tax affidavit accompanying the APS. These cautions do not prohibit dealings with the parcel.
The register of a caution after a fraudulent conveyance or improper power of sale proceedings will also require the Land Register to remove the caution after 60 days.
Section 128 Cautions
The second category allows parties with “proprietary interests” to register cautions on property. This may include beneficiaries under trust agreements who claim entitlements to land and optionees under an option to purchase the lands, but excludes interests in a lease. Furthermore, parties can apply for a caution pursuant to certain legislation.
The procedure for registering section 128 cautions is substantially similar to section 71 cautions that are not subject to an APS. Unlike those cautions, section 128 cautions prohibit dealings with the parcel register. This has the effect of preventing the owner from transferring or mortgaging the lands. The expiry for these cautions is 60 days and cannot be renewed, except by the Land Registrar in limited circumstances.
How Cautions are Removed
A party responsible for registering a caution may withdraw it. Additionally, an interested party may request the Land Registrar to remove a caution. He or she may do so 60 days after the transaction set out in an APS is completed or 60 days after the caution’s registration. However, parties seeking to remove cautions within the 60-day period must apply to a court which may be an expensive and contentious process.
Certificates of Pending Litigation
Like cautions, Certificates of Pending Litigation are registered on title to preserve a party’s interest in land. Certificates effectively preclude dealings with the land and notify the public that the land is subject to proceedings. Parties must apply to the court to obtain a Certificate.
The court must determine that the plaintiff’s claim to an interest in land is “legitimate and reasonable.” Courts consider many factors, including whether the land is unique and whether damages would be a sufficient remedy, among others. The Courts of Justice Act authorizes courts to penalize those who register without a reasonable claim.