The gap period for Alberta continues to trend longer, currently sitting at four months. Here’s how the registration gap is affecting deals, and what real estate professionals are doing about it.
What is the registration gap?
The registration gap, or gap period is the time in a real estate transaction between a deal is completed between the buyer and seller, and when the transfer or security documents are registered at the Land Titles Office (LTO). Though the people involved with the deal might consider it closed, it’s still legally pending, so neither funds nor ownership can transfer. If the title isn’t registered by the closing date listed, the deal can fall through.
Residential deals can use Western Conveyancing Protocol (WCP) to close on time, though using WCP on its own has pitfalls. When it comes to closing commercial deals smoothly and on time, legal professionals have three main options, but only one offers the reliability and protection clients need.
Can the Pending Registration Queue help you close every deal on time?
In April 2021, the LTO put in place a Pending Registration Queue (PRQ) for transactions. An optional online process, the PRQ ensures title registration in order of submission. Because the queue guarantees the priority of each request, buyers can transfer funds and complete transactions without having to wait for registration to be completed.
The Document Registration Request (DRR) has to be error-free, or it risks removal from priority. Incomplete affidavits of execution, a missing or incorrect legal description of the property, any missing names or addresses, or documents that are too low-quality for the LTO to scan are just some of the reasons a DRR can face removal after a 30-day grace period. If that happens, the registration loses its place in the queue and the deal may no longer close on time.
Can gap-only insurance protect your clients properly?
A commercial gap-only policy is a type of limited commercial title insurance. It lets buyers or lenders advance funds and close real estate deals without waiting for the registration of title by covering potential losses from gap-related issues such as intervening registrations. Like its name suggests, it only provides coverage for the registration gap period between agreement on a deal and its completed registration.
The main attraction of gap-only coverage is convenience. It’s like a toll bridge over a river—a way to pay for a safer and easier crossing. But a commercial client’s interest in their title doesn’t end once they cross that gap, so why should their insurance? They’re making a long-term investment, so their coverage should last the length of their ownership, not end when that ownership begins.
Title issues are problematic because they’re often not apparent when the deal closes, especially when it comes to forgery and fraud. Off-title defects can also remain undetected until long after closing. A business owner can invest significantly in the property, only to face a compliance order from the city or an encroachment complaint from a neighbour. Either scenario can result in tens or hundreds of thousands of dollars in losses from moving or demolishing improvements, or in some cases even losing road access.
It’s not just business owners and other buyers who need coverage once the registration gap ends. A commercial lender who needs to enforce their mortgage can have the CRA claim a tax lien on large portions of the sales proceeds—even years after the mortgage is discharged.
Title insurance is the only complete solution
As a legal professional, you need a solution that provides protection for everyone involved without having to worry about land registration delays. Title insurance covers numerous title and off-title risks for buyers and lenders, while letting the deal move forward smoothly. Residential title insurance is a key protection for homebuyers, and should always be used instead of WCP on its own.
A commercial title insurance policy provides all the coverage that a gap-only policy offers, as well as much more for as long as your client has an interest in the property. They can close the deal smoothly and confidently, while staying covered from losses down the road. Tax liens on the property, title fraud, survey errors, zoning issues and more can all cause significant losses—coverage gap-only insurance lacks.
Close deals on time, no matter the gap period and protect your clients for life with commercial title insurance from FCT.
Subject to certain exceptions, commercial title insurance policies equal or below $10M CAD are provided by FCT Insurance Company Ltd. Commercial title insurance policies above $10M CAD are provided by First American Title Insurance Company. Reference should be made to policy documents to confirm the insurer on any individual transaction. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.
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