At some point, you may find yourself tangled in a property dispute, where your financial or legal stake isn’t officially recognized on the property title. This is where understanding “what is a certificate of pending litigation” becomes vital. A Certificate of Pending Litigation (CPL) is a legal instrument that can protect your interests and prevent the premature sale or mortgage of the property until the dispute is resolved.
The Essence of a Certificate of Pending Litigation
A Certificate of Pending Litigation, often referred to as a CPL, is a potent judicial instrument employed in property disputes. It primarily serves to alert the public that the specific property is embroiled in a legal dispute, thus warning potential buyers or lenders to tread cautiously.
The CPL essentially ‘freezes’ the property title, obstructing any attempts to sell, transfer, or otherwise deal with the property until the litigation is resolved or the CPL is cancelled. It’s a global announcement that the property title has an unsettled issue that requires resolution before any further dealings.
The Rationale Behind a CPL
The CPL is particularly beneficial in situations where you’re claiming an interest in a property not registered in your name. For instance, suppose you’ve entered into a contract to purchase a property, and the deal hasn’t closed yet. In such a scenario, a CPL can help protect your interests by preventing the property owner from selling or mortgaging the property.
Process of Obtaining a CPL
The decision to seek a CPL should ideally be made at an early stage in the litigation process. To acquire a CPL, you’ll need to bring a motion before the courts, either “on notice” to the other parties involved or “without notice.”
The court examines two primary factors while considering a CPL application. First, it determines whether there’s a triable issue concerning your claim to an interest in the property. Second, assuming the threshold test is met, the court then deliberates if granting a CPL is equitable based on various factors such as:
- The nature of the plaintiff (For instance, if it’s a shell corporation)
- The uniqueness of the land
- The intentions of the parties when acquiring the land
- The complexity involved in calculating damages
- The adequacy of damages as an alternative to the claimed interest in the land
- The presence or absence of a willing purchaser
- The potential harm to each party if the CPL is or isn’t removed with or without security
- The possibility of adequately protecting the CPL-seeking party’s interests through other forms of security
- The diligence with which the moving party has pursued the proceeding.
When is a CPL Appropriate?
There are several instances where a CPL can be advantageous. For example, if a property seller attempts to withdraw from an already agreed-upon sale, a CPL can ensure that they can’t deal with the property until the dispute is resolved. Similarly, in cases of real estate fraud, where deceitful parties manipulate property titles to evade creditors, a CPL can prevent further disposal of the property until the dispute is adjudicated.
Instances When a CPL May Not be Used
It’s worth noting that a CPL should not be exploited as a leverage tool to gain an advantage in litigation. For instance, if your claim is purely financial, a CPL may not be the appropriate course of action. The courts have underscored that a CPL should only be used when safeguarding an interest in land, not to secure a financial claim.
How to Remove a CPL from a Property Title
If a CPL has been registered against your property, there are several ways to remove it. The Land Title Act outlines several circumstances where a CPL can be lifted:
- The court determines that the CPL claim does not meet the requirements outlined in the legislation.
- If a year has passed since the registration of the CPL and no steps have been taken in the proceeding, the CPL may be cancelled upon application to the court.
- A CPL may be cancelled if the action has been discontinued, dismissed, and no appeal has been filed within the stipulated time limit for an appeal, or if an appeal had been filed but was disposed of.
- The person initiating the proceedings requests the cancellation of the CPL.
- A CPL may be removed if the applicant owner can demonstrate to the court that they’ve experienced or are likely to experience, hardship and inconvenience due to the CPL.
Case Study: The Perils of Misusing a CPL
The case of Sadiq v. Simcoe Ridge (ARH) Homes Ltd. serves as a cautionary tale for those considering a CPL. In this case, the plaintiff, Mr. Sadiq, had purchased a pre-construction property in a new subdivision called Simcoe Landing. After sending an email to cancel his purchase, Mr. Sadiq did little to rectify what he termed an erroneous email. As a result, he brought a lawsuit and a motion for a CPL to block the sale of the lot to another person.
Regrettably, Mr. Sadiq’s delay of 19 months between his email to cancel the agreement and his motion was enough to deny the motion according to the court. Furthermore, the motion failed because the plaintiff didn’t meet the “rigorous proof” required to prove that the lot was unique to him and that there’s “no readily available substitute.”
This case reinforces that not all properties are sufficiently unique to warrant a CPL, and delay can be detrimental if you intend to tie up a property by requesting the court to issue a CPL.
Conclusion
Understanding what a Certificate of Pending Litigation is and how it functions is critical, especially if you are involved in a property dispute. A CPL can be a powerful tool that protects your interests and prevents the sale or mortgage of the property until the dispute is resolved. However, it’s crucial to note that it should not be misused as a leverage tool in litigation. If you’re considering applying for a CPL or need one removed, it’s advisable to seek legal advice to ensure that your interests are adequately protected.