How to Avoid a Shortfall

HOW TO AVOID A SHORTFALL

What is a Writ?

A writ of execution is a court order granted to enforce a judgment obtained by a plaintiff from a court. If the judgment debtor owns real property, the judgment creditor can record the execution to “freeze” the title until the execution is satisfied.

This is KEY. If anyone has a judgment registered in the same county as the property is located, that property cannot be sold until the judgment is lifted either by full payment directly to the sheriff or by reaching a settlement with the creditor whereby they agree to release or lift the judgment.

The effect of a writ is limited to the jurisdiction in which it is filed. For example, a writ filed with the Sheriff of the City of Toronto does not have any effect on real property located within the jurisdiction of the Sheriff of the Region of Peel. If a writ is to be enforced or have an effect in more than one location, then separate writs must be filed with each applicable sheriff/enforcement office.

How Does A Writ Get Registered Against An Individual or Property?

Once someone obtains a judgment against a plaintiff, that judgment can simply be filed with the Sheriff who maintains a computerized index of writs by the plaintiff’s name. Once registered, the writ is active for six years and can be renewed every six years.

Often a writ results from bringing a small claims court action against another person and that person ignoring it. If you do not defend a money claim made against you in a small claims court action, the party bringing the action will be granted a default judgment. That judgment can be filed with the Sheriff and form a writ. This writ can be filed with no further notice to the plaintiff.

Statutory orders related to federal or provincial tax enforcement as well as family support enforcement can also be registered without prior consent.

How Is The Real Estate Agent Affected?

An outstanding writ is one of the most common financial aspects of a transaction that will cause a property to either not close at all or close in a shortfall position with no sale proceeds to pay the real estate commission statement.

What Does It Mean to “Run Clients’ Names” and How Is This Done?

This is where an execution search is performed against the exact name of the registered owner. The Land Titles Act provides that if a writ is filed under a different name other than that under which the owner is registered, the writ has no effect.

I recommend that agents run an execution search since this is vital to determining if there is going to be sufficient funds on closing. Ideally this should be run when the property is listed to confirm there are no liens, and hopefully there is no change in status prior to closing. Lenders also require clearance before funds are advanced. The status of your clients may change between the listing date and the sale but at least you will have proven your due diligence to the buyer’s agent and the buyer by taking this proactive step. If the agents do not run the names as part of the listing process the first time the names will be checked is by the buyer’s lawyer as part of the title search. Problem with that is requisition dates are commonly a week prior to closing and there is not enough time to deal with a writ that is discovered so close to the closing.

Land Registry Office Search

Writ searches can be performed by visiting the local land registry office. The process is simple and inexpensive. These searches are performed at designated Teranet terminals within the land transfer office at a cost of $11.00 per name plus $6.00 per writ.

Remote Search

Lawyers can also conduct remote searches on the Teranet eXpress website. This system provides flexible remote access to search writs filed and entered into the Ontario Writs System. This allows lawyers to retrieve writs details online and print writs detail reports. The Teranet eXpress system is available weekdays 8 a.m. to 8 p.m.

What Information Do I Need To Perform A Writ Search?

If you know the exact spelling of the owner’s name and the city in which they reside, you can perform a search. It is important to note however that an execution search can yield a match even though actual identities differ. Should this occur, it is advisable to have your clients contact their real estate lawyer to apply for clearance.

Conclusion

Searching for writs is a necessary part of all real estate transactions. Despite how complicated the execution process may sound, the actual running of a client’s name is fairly quick and inexpensive. If there is a Writ that will impact the sale or purchase of a property the sooner the information is known, the more likely a solution can be reached.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Shari D. Elliott

Elliott & Elliott

135 Bayfield Street, Suite 101A

Barrie, Ontario, L4M 3B3

Tel.: 705-797-2672

Fax: 705-797-8445

Email: shari@elliottlawyers.com