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Password Please enter your Password. Forgot password? Don't have an account? Sign in via your Institution. You could not be signed in, please check and try again. Sign in with your library card Please enter your library card number. The new private lender's and TD's mortgages are also valid with second and first priority on title, respectively.
The original owners and the first private lender are not so lucky. Pursuant to s. Thus, the single mother actually has good title to the property at the expense of the retired original owners. As explained in CIBC Mortgages Inc v Computershare Trust Co of Canada , ONSC , this scheme involves three types of owners: an original owner, an intermediate owner like the home renovator who dealt directly with the fraudster , and a deferred owner like the single mother who acquired her property interests as a BFP from the intermediate owner.
While an intermediate owner has an opportunity to investigate the transaction and avoid the fraud, a deferred owner does not as they are further removed from the fraudster and are thus somewhat "more innocent". Accordingly, deferred owners are afforded protections by the Act that accord with Equity's Darling. However, as neither of the two new mortgagees had actual notice of the pre-existing mortgage that originally had first priority, the court held that they were entitled to rely on two principles underlying the Act — the mirror principle and the curtain principle.
The former principle holds that the land's parcel register is a "perfect mirror" of the state of title overall, while the latter principle states that purchasers need not investigate the land's past dealings to see if there is fraudulent conveyance in the chain partially because this would lead to soaring due diligence costs. Instead, prospective purchasers or encumbrancers are entitled to rely on the parcel register to provide "actual notice", and need not search behind it.
Technically, as the court mentioned on similar facts, the original private lender's mortgage interest would have third priority behind TD and the new second mortgage. Afterwards, any remaining funds would seemingly first go to the single mother to make her whole and then to the retired original owners.
If the property perhaps later doubled in value, all innocent parties may be able to recoup their losses. Accordingly, while it may be fun to imagine Equity as a white knight saving his BFP damsel in distress, "Equity's Darling" is mostly just a memorable metaphor that involves a shorter name for the BFP defence. In reality, Equity has simply chosen to favour the BFP amongst multiple innocent parties competing for priority, while perhaps benignly neglecting original owners with pre-existing interests.
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Learn More Accept. Real Estate and Construction. Your LinkedIn Connections with the authors. To print this article, all you need is to be registered or login on Mondaq. Pallett Valo LLP. Buyers who rely on real estate services provided by a family friend would do well to ensure that they are fully aware of the consequences of entering into a binding agreement of purchase and sale before they This article is posted as an important update for owners of real estate in BC.
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