Navigating Alberta’s registration gap

Nov 11th, 2021 | By FCT

Over the last 18 months, the registration gap in Alberta has trended upwards, currently sitting at eight to ten weeks.

What is the registration gap?

The term “registration gap” refers to the period of time in a real estate transaction (purchase or loan) between deal completion, the advancing of funds and or keys changing hands, and when the transfer or security documents are completely registered in a Land Titles System. During this gap period, though the people involved with the deal might consider it closed, it is still legally pending, so nobody can transfer or receive funds or ownership. If the title isn’t registered by the closing date listed, the deal can fall through.

The Land Title Office (LTO) is working hard to clear the backlog and avoid delays. The LTO, the Law Society of Alberta and even some private companies have introduced workarounds, agreements and products to help legal professionals and their clients bridge the gap. How are these solutions holding up?

The Pending Registration Queue

In April, 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, 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.

If that happens, the PRQ only holds the deal’s priority for 30 days while the lawyer or notary fixes the issues and resubmits the DRR, with the registration labelled “deficient” in the meantime. If it takes too long to receive the notice or get the information or documents needed to fix the DRR’s issues, that 30-day clock could run out. If that happens, the registration loses its place in the queue and the deal may no longer close on time.

Western Protocol: A residential-only solution

Western Conveyancing Protocol (WCP) provides an effective way to close deals on time and get funds released, but it doesn’t apply to every transaction. Each law society tailors the protocol to its province, and in Alberta, WCP applies to existing single-family residence properties with four or fewer units (including empty residential lots). It specifically leaves out commercial properties, which represent a significant dollar amount of real estate transactions in Alberta.

Gap insurance: an incomplete commercial solution

What is gap insurance?

A commercial gap insurance policy is a type of limited commercial title insurance. It lets buyers or lenders advance funds and close real estate transactions without waiting for the registration of title by covering potential losses from ‘gap’ related issues such as intervening registrations. Like its name suggests, it provides coverage only for the registration gap period between agreement on a deal and its completed registration.

Is gap-only insurance enough for your commercial clients?

The main attraction of gap-only coverage lies in the convenience it offers. It’s like a toll bridge over a river—a way to pay for a safer and easier crossing, with no further need of it once across. 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 are often not apparent on deal completion—especially forgery and fraud.

Off-title defects can also remain undetected until long after a business owner has invested significantly in the property, only to face a compliance order from the city or an encroachment complaint from a neighbour. That 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 buyer clients 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 the lender needs to recoup their investment—even years after the discharge of mortgage.

Title insurance: the only complete solution

As a legal professional, you need a solution that lets deals close on time while providing protection for everyone involved without having to worry about land registration delays. Whether for the lender or the buyer, a title insurance policy covers numerous title and off-title risks, while letting the deal move forward smoothly and safely.

A commercial title insurance policy provides the protection that a gap-only policy offers, plus many other protections for as long as your client has an interest in the property. They can close the deal smoothly and confidently, while staying protected 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.

 

 

 

Most commercial title insurance policies are provided jointly by FCT Insurance Company Ltd. and First American Title Insurance Company, with the remainder being solely provided by FCT Insurance Company Ltd. 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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