Ontario Ban on Notice of Security Interest for Consumer Goods

The Homeowner Protection Act, 2024 (the “Act”), which came into effect in Ontario on June 6, 2024, introduced significant changes aimed at protecting homeowners in Ontario. Among these changes were certain amendments to the Personal Property Security Act (“PPSA”) which prohibit the registration of Notices of Security Interest (“NOSI”) on title to property when such notices relate to financed or rented consumer goods. This measure specifically targets consumer goods installed in homes, such as HVAC systems, water heaters, and furnaces, which are often acquired through financing or leasing arrangements.

 Previously, NOSI allowed financing companies and lessors of consumer goods to secure their interests by tying consumer goods to property titles. This mechanism effectively delayed debt enforcement until property sales or refinancing, offering a cost-effective way for lenders to recover funds. However, the system was found susceptible to abuse, with some businesses using predatory sales tactics to lock homeowners into burdensome financing agreements of which the homeowners were often unaware and often for equipment that they did not need. Many homeowners would later discover that title to their property was subject to one or more NOSI, which added complications at the time of a property sale or refinancing. In rarer cases, NOSI were utilized in mortgage fraud schemes that similarly targeted vulnerable homeowners.

 The Act prohibits future NOSI registrations and retroactively declares all existing consumer good NOSI as expired, enabling property owners to remove them from title provided they file the necessary applications. The amendments are limited to consumer goods which are defined in the PPSA as goods that are used or acquired for use primarily for personal, family or household purposes. Consumer goods can be distinguished from commercial goods or fixtures which are used or acquired for commercial purposes, thus leaving commercial financing arrangements unaffected.

 These changes have significantly simplified residential real estate transactions involving properties with NOSI registered and has reduced the risk of homeowners being financially exploited. It is worth noting however that security interests in consumer goods can still be protected in alternative ways, including PPSA registrations against a debtor’s name, so the elimination of NOSI from property title does not eliminate risks associated with security interests in consumer goods. Accordingly, in the residential real estate context, it is still important for Sellers to disclose to Buyers details of financing or lease arrangements relating to consumer goods located in their home and for Buyers to carefully consider those financing or lease arrangements before agreeing to become responsible for same in the course of a transaction.

 We would be pleased to assist homeowners with addressing matters related to NOSI, whether in the course of a residential real estate transaction or otherwise.

 The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.