[Kian Rastegar] The End of NOSIs and What it Means for Your Next Real Estate Closing

For years, the Notice of Security Interest (NOSI) has been a pain point of Ontario real estate closings. Traditionally, a NOSI was an instrument registered against a property’s title to secure a debt obligation relating to certain equipment or fixtures, most commonly rental HVAC units, furnaces, and water filters or softeners.

While originally intended to protect legitimate business interests, the NOSI system became a tool for predatory practices. Vulnerable homeowners were often tricked into signing exorbitant rental contracts, only discovering the NOSI on their title years later when trying to sell or refinance. Facing a looming closing date, sellers were effectively held hostage if the security holder did not agree to postpone their interest. This would force them to pay tens of thousands of dollars in buyout fees just to remove the registration and close the deal.

Thankfully, the landscape has changed. But for real estate professionals and buyers, the legislative fix has created a new set of hurdles to navigate on closing day.

The Big Change: Bill 200

On June 6th, 2024, the Homeowner Protection Act, 2024 (Bill 200) officially came into force. The legislation amended the Personal Property Security Act to explicitly prohibit the registration of NOSIs if the collateral is consumer goods. 

Crucially, the legislation was retroactive. All NOSIs relating to consumer goods that were in effect immediately before the day the Act received Royal Assent are now deemed to have expired on June 6th, 2024. 

The Practical Uncertainty in Closings

While the ban is a massive victory for consumer protection, it has created a temporary headache for real estate lawyers. The question for practicing real estate lawyers is: who is responsible for deleting these expired NOSIs from title?

The answer isn’t entirely clear yet.

On the one hand, the NOSI is legally expired and therefore does not materially affect the title of the property. Notably, the Province of Ontario is warning consumers about a “scam to remove NOSIs from title.” The Province’s website explicitly warns: “Homeowners are not required to remove [the NOSI] from their title, as the land is no longer affected by them. Do not feel pressured to enter into any contract [to remove the NOSI from title].” Perhaps this comment from the Province sways the argument in favour of the position that sellers are not obligated to remove NOSIs from title, since the NOSIs do not affect the quality of the title. 

On the other hand, it is still a visible registration on title representing a debt obligation (albeit expired) that the buyer has not agreed to assume. Under a standard OREA Agreement of Purchase and Sale, sellers are required to provide a clean title. Naturally, title insurers, lenders, and buyers’ lawyers are risk-averse and will often demand that the seller’s lawyer formally register an application to delete the NOSI from the land registry system before closing. Until standard industry practices settle, this remains a hot point of negotiation on closing day.

Out of Sight, But Not Out of Mind

Realtors and buyers must understand one critical caveat: Bill 200 deleted the NOSI from title, but it did not delete the underlying debt. The homeowner is still legally bound by the rental or financing contract they signed. 

Because rental items no longer appear on title, a standard land registry search will not reveal a rented furnace or water heater. This makes it easy for a buyer to inadvertently inherit an expensive equipment lease. To combat this, buyers’ lawyers now sometimes conduct Personal Property Security Act (PPSA) searches against the seller’s name to surface these hidden obligations. Real estate agents must also be hyper-vigilant, asking direct questions about rented fixtures during the listing process and ensuring the Agreement of Purchase and Sale explicitly addresses any equipment being assumed. 

In Sum

The demise of the NOSI for consumer goods is a monumental step forward for Ontario property owners. However, it shifts the burden of due diligence. Real estate professionals must adapt by actively asking about rental equipment and relying on PPSA searches before a deal goes firm. 

Whether you are buying, selling, or advising clients, working alongside our knowledgeable real estate lawyers at Realty Care Law is critical to navigating the “ghosts” of expired NOSIs and ensuring a smooth closing.