What Is a Certificate of Pending Litigation?
Oct. 3, 2024
If you find yourself embroiled in a legal dispute over real estate, understanding a Certificate of Pending Litigation (CPL) is very important. Attorney Matthew Harris is here to help you understand CPLs, offering insight into their purpose, implications, and the relevant laws in Canada. If you're a homeowner, investor, or legal practitioner in Toronto, Ontario, Hamilton, London, or Ottawa, this guide will provide valuable information to help you make informed decisions.
What is a Certificate of Pending Litigation?
A Certificate of Pending Litigation, often abbreviated to CPL, is a legal tool used in real estate disputes. It is a notice registered against the title of a property, signaling to potential buyers or lenders that the property is currently subject to ongoing litigation. Think of it as a red flag cautioning third parties about the legal uncertainties surrounding the property.
The Purpose of a CPL
The primary purpose of a CPL is to preserve the property in its current state until the litigation is resolved. This means that the property cannot be sold, mortgaged, or otherwise encumbered without the consent of the party who registered the CPL. This protective measure ensures that if the plaintiff wins the case, the property will still be available to satisfy the judgment.
When is a CPL Issued?
A CPL is typically issued in cases where there is a dispute over the ownership or interest in a piece of real estate. Typical scenarios include breach of contract, fraudulent transactions, and family disputes involving property. To obtain a CPL, the party must demonstrate to the court that there is a genuine issue to be tried and that they have a reasonable claim to the property.
How Does a CPL Affect Property Transactions?
A CPL has significant implications for property transactions. Once registered, it deters potential buyers and lenders, making it nearly impossible to sell or mortgage the property until the litigation is resolved. This can be a double-edged sword; while it protects the plaintiff’s interest, it can also complicate matters for the property owner.
Impact on Buyers
For prospective buyers, a CPL is a clear warning sign. Purchasing a property with a CPL could mean inheriting the ongoing legal dispute and potential financial liabilities. Most buyers will steer clear of such properties to avoid the risks involved.
Impact on Sellers
For sellers, a CPL can be frustrating as it severely limits their ability to dispose of the property. Even if they find a willing buyer, the sale cannot proceed without resolving the CPL. This often necessitates negotiating with the plaintiff or seeking a court order to discharge the CPL.
Impact on Lenders
Lenders are also wary of properties with a CPL. Since the CPL indicates unresolved legal issues, it adds an element of risk to the loan. Most financial institutions will refuse to mortgage such properties, making it difficult for owners to refinance or use the property as collateral.
How to Register a CPL
Registering a CPL involves a series of legal steps. Here’s a simplified overview to help you understand the process.
Filing a lawsuit: The first step in registering a CPL is to file a lawsuit concerning the property. This legal action sets the stage for requesting a CPL from the court.
Applying for a CPL: The plaintiff can apply for a CPL once the lawsuit is filed. This involves submitting a detailed affidavit outlining the nature of the dispute and the reasons for requesting a CPL. The court will review the application to determine if there is a legitimate issue to be tried.
Court approval: If the court is satisfied with the application, it will issue an order allowing the registration of the CPL. This order must be registered against the title of the property at the land registry office.
Notification: After the CPL is registered, the plaintiff must notify all interested parties, including the property owner and potential buyers or lenders. This ensures that everyone is aware of the ongoing litigation and the restrictions imposed by the CPL.
Removing a CPL
Removing a CPL can be as complicated as registering one. Here are the steps involved.
Negotiating a settlement: One of the most straightforward ways to remove a CPL is to negotiate a settlement with the plaintiff. This could involve resolving the underlying dispute or offering compensation in exchange for withdrawing the CPL.
Court application: If a settlement is not possible, the property owner can apply to the court to have the CPL removed. This requires demonstrating that the CPL is causing undue hardship or that there is no legitimate issue to be tried.
Discharge order: If the property owner's arguments convince the court, it will issue a discharge order. This order must be registered at the land registry office to remove the CPL from the property title officially.
CPL Laws in Canada
In Canada, the laws governing CPLs vary slightly from province to province. However, the core principles remain consistent across the country.
Ontario: In Ontario, CPLs are governed by the Land Titles Act and the Registry Act. The process for obtaining and removing a CPL is relatively streamlined, with clear guidelines provided by the court system.
British Columbia: British Columbia has its own set of rules under the Land Title Act. One notable difference is the requirement for the plaintiff to provide an undertaking to pay damages if the CPL is unjustified.
Alberta: Alberta follows similar procedures under the Land Titles Act but strongly emphasizes the plaintiff demonstrating a strong prima facie case before a CPL is granted.
Commercial Litigation and Insolvency Lawyer in Toronto, Ontario
Matthew R Harris founded his private firm in Toronto, Canada, to offer high-level legal representation and counsel to businesses throughout the region. A skilled litigator, Matthew is dedicated to protecting the professional interests of his clients while helping them pursue the best possible resolution to their legal challenges.
He has the experience and dedication to achieve the best possible resolution for Toronto, Ontario, Hamilton, London, and Ottawa residents seeking legal assistance with CPL matters. Contact Matthew R Harris Law P.C. today to learn how they can assist you with your legal needs.