A Certificate of Pending Litigation (CPL), formerly known as a "lis pendens," is a crucial tool in Ontario's legal landscape. It acts as a public notice that a lawsuit concerning title to, or an interest in, a specific piece of real property is currently underway. This article will delve into the intricacies of CPLs in Ontario, exploring their purpose, application, implications, and the process involved in obtaining and removing them.
The Purpose of a
CPL: Protecting Interests in Real Estate
Imagine you're embroiled
in a legal battle over the rightful ownership of a house. Without a CPL, the
current owner could potentially sell the property to an unsuspecting buyer,
leaving you with a much more complicated (and potentially losing) legal fight
against the new owner. This is where a CPL comes into play.
The primary
function of a CPL is to provide notice to the world that the
title to, or an interest in, a particular piece of real property is subject to
ongoing litigation. This notice is registered on title to the property,
ensuring that any potential purchaser, lender, or other party dealing with the
property is aware of the pending legal claim. In essence, it puts a
"flag" on the property, warning anyone contemplating a transaction
that a potential problem exists.
When is a CPL
Appropriate?
A CPL is not
appropriate for every lawsuit. It's specifically designed for cases that
directly affect the title to, or interest in, real property. Here
are some common scenarios where a CPL might be sought:
- Disputes
over Ownership: Contests regarding
who owns a property, often arising from wills, inheritance, or boundary
disputes.
- Enforcement
of Agreements of Purchase and Sale: When
a buyer or seller believes the other party has breached an agreement to
buy or sell real estate.
- Construction
Liens: Contractors
registering liens against a property for unpaid work.
- Claims of Equitable Ownership: Claims
based on contributions to the purchase or improvement of a property
without being formally named on title (e.g., common-law partners).
- Mortgage
Disputes: Legal battles
involving the foreclosure or validity of a mortgage.
Obtaining a
Certificate of Pending Litigation: The Process
Obtaining a CPL
requires a court order. The plaintiff (the party initiating the lawsuit) must
demonstrate to the court that there is a reasonable claim concerning
title to, or an interest in, the property. This isn't a full trial on the
merits; rather, the court assesses whether there's a plausible argument that
the plaintiff could ultimately succeed in their claim.
The process
generally involves the following steps:
1. Commence a Lawsuit: File a statement of claim with the court, outlining the legal basis
for the claim and the specific property involved.
2. Motion for a CPL: Bring a motion before a judge seeking an order authorizing the
issuance of a CPL. This motion will be supported by affidavit evidence
outlining the facts of the case and demonstrating a reasonable claim.
3. Notice to all Parties: Ensure all parties with an interest in the property, including the
owner and any mortgagees, are properly served with notice of the motion for a
CPL.
4. Court Hearing: Attend the hearing where the judge will review the evidence and
arguments presented by both sides.
5. Order and Registration: If the judge is satisfied that a reasonable claim exists, they will
issue an order authorizing the issuance of a CPL. This order is then registered
on title to the property at the Land Registry Office.
Implications of
a CPL: A Cloud on Title
The registration
of a CPL creates a significant "cloud" on the title of the property. It can have several
consequences:
- Difficulty
Selling: A CPL makes it much
harder to sell the property. Potential buyers are likely to be hesitant,
as they would inherit the legal uncertainty.
- Challenges
Securing Financing: Banks and other
lenders are generally reluctant to provide mortgages or other financing on
properties with a CPL, as their security is compromised.
- Impact
on Property Value: The existence of a
CPL can negatively impact the market value of the property.
Removing a
Certificate of Pending Litigation: Lifting the Cloud
There are
several ways a CPL can be removed from title:
- Successful
Resolution of the Underlying Lawsuit: If
the plaintiff loses the lawsuit, the CPL will be discharged as part of the
court's judgment.
- Consent
of the Plaintiff: The plaintiff can
voluntarily discharge the CPL by providing a written release, typically
after a settlement agreement has been reached.
- Court
Order Discharging the CPL: The defendant (the
property owner) can bring a motion before the court seeking an order
discharging the CPL. This motion can be based on arguments such as:
- The
plaintiff's claim is weak or frivolous.
- The
plaintiff is unduly delaying the litigation.
- The
hardship to the defendant outweighs the benefit to the plaintiff.
- The
defendant is willing to provide adequate security (e.g., money held in
escrow) to protect the plaintiff's potential claim.
Considerations and Cautions
- Strategic
Use: CPLs should be used strategically. Filing a
CPL without a legitimate claim can have serious consequences, including
being ordered to pay damages to the property owner.
- Legal
Advice is Essential: Navigating the
complexities of CPLs requires the advice of an experienced real estate
lawyer. They can assess the merits of your case, advise on the appropriate
course of action, and represent you in court.
- Security
for Costs: The court may
require the plaintiff to provide security for costs to protect the
defendant from potential losses incurred due to the CPL.
Conclusion
Certificates of
Pending Litigation are powerful legal tools in Ontario, designed to protect
legitimate claims to real property. Understanding their purpose, implications,
and the process involved in obtaining and removing them is crucial for anyone
involved in real estate disputes. Seeking professional legal advice is
paramount to ensure that CPLs are used appropriately and effectively to
safeguard your interests.