Ontario Real Estate and Commercial Litigation

A Certificate of Pending Litigation, commonly called a CPL, can be a powerful remedy in Ontario litigation involving real property. When registered on title to a property, a CPL gives notice to third parties that the property is the subject of an ongoing legal dispute.

A CPL can have significant practical consequences. It may make it difficult for an owner to sell, mortgage or otherwise deal with the property while the litigation is ongoing. For that reason, a CPL is not available simply because someone is owed money or has commenced a lawsuit against a property owner.

The central question is whether the lawsuit genuinely puts an interest in the land itself in issue. Ontario courts also retain discretion to consider whether granting or maintaining the CPL is fair in all of the circumstances.

This article explains what a CPL is, when a Certificate of Pending Litigation can be used in Ontario, how a CPL is obtained, and how a property owner may seek to have one discharged.

What Is a Certificate of Pending Litigation?

A Certificate of Pending Litigation is a court-authorized certificate that may be registered against title to real property where an interest in that land is in question in a legal proceeding.

Section 103 of Ontario’s Courts of Justice Act provides the statutory framework for CPLs. Rule 42 of the Rules of Civil Procedure sets out the procedure for obtaining and discharging a CPL.

The purpose of a CPL is generally to give third parties notice that a proprietary claim involving the property is being litigated and to protect the claimed interest until the dispute is resolved. A CPL does not, by itself, create an ownership interest in the property.

When Can a CPL Be Used in Ontario?

A CPL may be appropriate where the plaintiff or applicant advances a reasonable claim to an interest in the specific land. The claim must therefore be more than a claim that the defendant owes money.

Examples of disputes in which a CPL may potentially be sought include:

• disputes over ownership of real property;
• claims seeking specific performance of an agreement of purchase and sale;
• claims involving a beneficial or equitable interest in property;
• constructive trust or resulting trust claims involving real estate;
• joint venture or partnership disputes in which a party claims an interest in particular land;
• certain fraud or fraudulent conveyance claims involving real property;
• estate disputes in which ownership or entitlement to real property is genuinely in issue; and
• other proceedings in which the relief claimed directly concerns an interest in identified land.

Whether a CPL is available depends on the actual facts, pleadings and remedy being claimed. Simply mentioning real estate in a lawsuit is not enough.

A CPL Is Generally Not a Tool for Collecting an Ordinary Debt

One of the most important limitations on a CPL is that it is not intended to operate as general security for an ordinary monetary claim.

If a plaintiff’s true claim is simply that the defendant owes money, the fact that the defendant happens to own valuable real estate will generally not transform the debt claim into a claim to an interest in land.

This distinction is important because registering a CPL can substantially affect an owner’s ability to deal with the property. The Courts of Justice Act also provides that a party who registers a CPL without a reasonable claim to an interest in the land may be liable for damages resulting from the registration.

What Must Be Shown to Obtain a CPL?

Ontario courts have repeatedly explained that the threshold question is whether there is a triable issue concerning the claimant’s asserted interest in the land. At the CPL stage, the court is not ordinarily deciding the ultimate merits of the lawsuit.

The leading Ontario authorities, including Perruzza v. Spatone, also recognize that the court must exercise an equitable discretion. Establishing a triable issue concerning an interest in land does not necessarily mean that a CPL will automatically be granted or maintained.

Depending on the circumstances, the court may consider factors such as:

• the strength and nature of the claimed interest in the property;
• whether the property is unique;
• whether the claimant has an alternative claim for damages;
• whether damages can be readily calculated;
• whether damages would provide an adequate remedy;
• whether there is a purchaser or proposed transaction involving the property;
• the prejudice or potential harm to each side if the CPL is granted or refused;
• whether the CPL is being sought for a proper purpose;
• whether another form of security could adequately protect the claimant; and
• whether the proceeding is being prosecuted with reasonable diligence.

The analysis is fact-specific. The court ultimately considers both the claimed interest in land and the equities between the parties.

How Do You Obtain a CPL in Ontario?

A party cannot simply prepare a CPL and register it on title. Under Rule 42.01 of the Rules of Civil Procedure, a CPL may be issued by a registrar only pursuant to a court order.

A party seeking a CPL should include the claim for a Certificate of Pending Litigation in the originating process or pleading commencing the proceeding, together with a description of the land sufficient for registration.

Rule 42.01 permits a motion for a CPL to be made without notice. Where an order is obtained without notice, the party obtaining it must promptly serve the order and the motion materials on the parties against whom an interest in land is claimed.

Because a without-notice order is obtained in the absence of the affected party, the moving party must be particularly careful to provide the court with a fair and complete presentation of the material facts.

What Happens After a CPL Is Registered on Title?

Once registered, a CPL gives notice through the land registration system that the property is subject to litigation involving a claimed interest in the land.

A CPL does not necessarily make a sale or mortgage legally impossible. In practice, however, purchasers, lenders and their lawyers may be unwilling to complete a transaction while a CPL remains on title. This can give the CPL substantial practical significance.

For that reason, disputes about CPLs often become urgent when there is a pending sale, refinancing, mortgage renewal or other transaction involving the property.

Can a Property Owner Have a CPL Removed?

Yes. A party affected by a CPL can bring a motion asking the court to discharge it.

Section 103(6) of the Courts of Justice Act gives the court discretion to discharge a CPL in several circumstances, including where the claimant does not have a reasonable claim to the interest in land, does not prosecute the proceeding with reasonable diligence, can be adequately protected by another form of security, or where discharge is otherwise just.

A property owner seeking to remove a CPL may therefore challenge both the legal basis for the claimed interest in land and the fairness of continuing to burden the property with the certificate.

Can Security Be Used Instead of a CPL?

In an appropriate case, the court may consider whether the claimant’s interests can be adequately protected by another form of security.

For example, the circumstances may permit money or another form of security to stand in place of the CPL. Whether this is appropriate depends on the nature of the underlying claim. A claim to a truly unique proprietary interest may be different from a claim whose practical value can be adequately protected by money.

What If the CPL Is Being Used for an Improper Purpose?

A CPL should not be used simply to place pressure on a defendant, prevent an unrelated transaction, or obtain leverage in an ordinary monetary dispute.

The claimant should have a genuine and reasonable claim to an interest in the property. Improper use of a CPL can lead to a motion to discharge it, an adverse costs award and, where the statutory requirements are met, a claim for damages caused by the registration.

Parties should therefore obtain legal advice before seeking a CPL or before refusing a reasonable request to discharge one.

CPLs in Agreements of Purchase and Sale

Disputes arising from agreements to purchase real estate are a common context in which CPLs are considered.

If a purchaser alleges that the vendor improperly refused to complete the transaction and seeks specific performance requiring the property to be transferred, the purchaser may seek a CPL to protect the claimed right to acquire the property while the lawsuit is pending.

However, specific performance is not automatic in every failed real estate transaction. The nature of the property, the availability and adequacy of damages, the contractual terms and the surrounding circumstances can all affect whether a CPL should be granted or maintained.

CPLs in Constructive Trust and Beneficial Ownership Claims

A CPL may also arise where a party claims a beneficial or equitable interest in property even though that party is not the registered owner.

For example, a claimant may allege that money was contributed toward the acquisition or improvement of a property in circumstances giving rise to a constructive trust or resulting trust. The court must examine whether the pleaded facts and evidence disclose a genuine claim to an interest in the particular land rather than merely a claim for repayment of money.

The way the claim is pleaded and the connection between the alleged contribution and the property can therefore be critical.

CPLs in Estate and Family Property Disputes

Real property can also become the focus of estate, trust or family-related litigation. A CPL may be sought where a party asserts a genuine ownership, trust or other proprietary interest in a specific property.

Again, the existence of a family relationship or an estate dispute does not by itself justify a CPL. The claimant must connect the relief sought to an interest in the land.

How Long Does a CPL Remain on Title?

A CPL may remain registered while the underlying litigation is pending unless it is discharged by court order or otherwise removed in accordance with the resolution of the proceeding.

A claimant who obtains a CPL should continue to prosecute the lawsuit with reasonable diligence. Delay can become an important factor on a later motion to discharge the certificate.

What Should You Do If a CPL Has Been Registered Against Your Property?

If a CPL has been registered against your property, it should be addressed promptly, particularly if you are attempting to sell, refinance or mortgage the property.

An Ontario litigation lawyer can review the pleading, the court order authorizing the CPL, the evidence relied upon to obtain it and the nature of the alleged interest in land. Depending on the circumstances, it may be appropriate to negotiate its removal, offer alternate security, or bring a motion to discharge the CPL.

When Should You Speak With a CPL Lawyer?

Legal advice should be considered early where:

• you claim an ownership or beneficial interest in real property that may be sold or transferred;
• a real estate transaction has failed and you are seeking specific performance;
• you believe property that is the subject of your lawsuit may be sold, mortgaged or transferred;
• a CPL has been registered against property you own;
• a CPL is preventing a sale or refinancing from closing;
• you believe a CPL was registered only to secure a monetary claim or obtain litigation leverage;
• you want to substitute security for an existing CPL; or
• you need to bring or respond to a motion to discharge a CPL.

Speak With an Ontario Certificate of Pending Litigation Lawyer

Certificate of Pending Litigation disputes can move quickly and can have significant consequences for property owners, purchasers, lenders and parties claiming an interest in real estate.

This law firm represents plaintiffs and defendants in Ontario real estate and commercial litigation, including disputes involving Certificates of Pending Litigation, agreements of purchase and sale, ownership and beneficial interests in property, constructive trusts, fraudulent conveyances and motions to discharge CPLs.

If you are considering seeking a CPL, or a CPL has been registered against your property, contact our law firm to discuss your legal options with an Ontario litigation lawyer.

Disclaimer: This article provides general information only and is not legal advice. The rights and remedies available in a commercial tenancy dispute depend on the lease and the particular circumstances.