The Alberta government has amended the Land lities Act to abolish Duplicate Certificates of Title. The step is worthwhile, but exposes certain creditors to a loss of their security in land.
The Land Titles Act (Alberta) currently permits the issuance of a Duplicate Certificate of Title (DCT) for each parcel of land. Once issued, the Land Titles Office will not process any transfer or mortgage or most encumbrances granted by the owner until the DCT is returned to the Land Titles Office. 1n effect, whoever holds the DCT can block any land transactions contemplated by the owner.
Because of the "blocking" nature of a DCT, it has been common for a borrower to give the DCT to a lender as a form of security for a loan. This pledge of title would create an equitable mortgage, without the need for the lender to register anything against title to the parcel (although many lenders do make such registrations). 1n effect, handing over the DCT to a lender is an inexpensive and simple way to give mortgage security.
Bill 10 will abolish the concept of and the need for the DCT, effective July 1, 2000.
Abolishing the DCT will assist the government in moderni2ing the land titles system in Alberta, and will streamline the computerized title process by eliminating an unnecessary piece of paper for each parcel. As the government said in the Legislative Assembly, "the land titles office is changing to an automated environment in order to enhance productivity and provide continuing service to Albertans.....The duplicate certificate of title ... has outlived its usefulness. This duplicate certificate has become an obstacle to the implementation of technology, and it limits productivity and improved service to Albertans.
We will eliminate this certificate in preference to the automated record over a 12-month period to give landowners and other interested parties notification of the change and allow for an easy transition."
This amendment to the Land Titles Act (Alberta) is contentious for only one reason: a lender holding a DCT after June, 2000 to secure a loan will lose that security unless that lender takes active steps to register appropriate security against title to the parcel. This is so because after that date the owner will be able to transfer, mortgage and otherwise deal with land without the need to produce a DCT.
The Opposition referred to the consequence on lenders holding DCTs as a government expropriation of lenders' property and rights, and suggested the Bill be amended to "grandfather" existing issued DCTs. The government passed the Bill unamended.
Even if the pledge of title through hypothecation of the DCT becomes ineffective, many lenders also have provisions in their pledge agreements that charge the land and could form the basis for a direct registration against title.
Those lenders at most risk, however, are those who might not have anything except the DCT, and who do not learn of the change in law until it is too late.
If you are a lender holding a DCT as security, you should take steps well in advance of July 1, 2000 to obtain proper security registered directly against title.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
