Writs of Execution and How to Avoid a Shortfall
What is a Writ?
A writ of execution (“writ”) is a court order or other statutory authority that permits a creditor to instruct a sheriff to seize and sell assets/property of a debtor to satisfy an unpaid judgment. The act of filing a writ is the first step toward instructing the enforcement officer to seize and sell the debtor’s property. A variety of federal and provincial statutes, regulations or an order of the court may act as the authority for the issuance of a writ.
A creditor may file a writ against a debtor in one or more of the 49 counties or districts (sheriff/enforcement offices) in Ontario. From the time it is filed, a writ may encumber any land or interest in land presently owned, or land that may be purchased in the future by the debtor, in the county or district in which a writ has been filed. Effectively, the judgement creditor can record the execution to “freeze” the title to real property until the execution is satisfied.
This is KEY. If anyone has a judgement registered in the same county as the property is located, that property cannot be sold until the judgement 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 judgement.
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 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?
Often a writ results from bringing a small claims court action against another person and that person ignores it. If you do not defend a money claim made against you in a small claims court, the party bringing the action will be granted a default judgement. That judgement can be filed with the sheriff and form a writ. This writ can be filed against a person’s name with no further notice to them. Statutory orders related to federal or provincial tax enforcement as well as family support enforcement can also be registered without prior consent.
If a debtor owns property, a creditor is entitled to file an application to the Land and Property Information Office to file a writ on the title to all real property owned by the debtor. The writ once registered on title is active for up to six years, and prevents the debtor from selling the property unless the debt is paid. Each time a writ is renewed, it becomes active for a further six years. A writ may be renewed before its expiration date by filing a Request to Renew (Form 60 E which can be accessed by clicking here).
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 short fall position with no sale proceeds to pay the real estate commission statement.
In the case Re Grant, it is affirmed that real estate agents and brokers are entrusted with significant sums of money and this role carries the expectation that persons working in the real estate industry appreciate the responsibilities they have and will act accordingly.
It is not uncommon for agents to be unaware of a writ registered against a property and to be utterly surprised when these show up during title search, which is often a week before closing. This timeframe is often inadequate to satisfy the settlement timelines of some writs or negotiate a settlement between multiple debtors if there is going to be a shortfall. As a result, this could jeopardize the closing deadline since you cannot sell property without paying a writ if it is registered; neither can you obtain mortgage funds. This should be factored in as early as possible to avoid a short sale or failed transaction and to protect the real estate commission.
Listing agents are advised to run the names that are on title for the nominal fee of $11.00 per person to see whether these names are clear. Of course a writ can be registered any day and it could happen after you run it. In most cases, however, they are in place for a longer period and should have been disclosed and discovered earlier.
In the case Lograsso v Kuchar, a client advanced negligence claims when a real estate transaction was closed even though a writ was filed against the property. This case shows the importance of making the necessary investigations and acting accordingly. Failure to act in a timely manner could result in costly remedial action on the part of the agent and/or solicitor.
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, R.S.O. 1990, c. L.5 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. This search determines whether a person, corporation or other legal entity has a writ filed against them which affects all lands owned by such person, corporation or other legal entity within the jurisdiction of the sheriff’s office and/or the land titles office where such writs are filed.
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 buyers appear to be in a situation where money is tight and they might have had a situation in the past which could be a cause for concern, it is advisable that agents have their names checked. This is the only way to ensure there are no outstanding judgments that may affect the transaction, whether a sale or purchase.
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. The problem with that is that requisition dates are commonly a week prior to closing and there is not enough time to deal with a writ that is discovered that close to the closing date.
Land Registry Office Search
Writ searches can be performed by visiting the local land registry office and performing a Writ search. 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 writ details online and print the writ 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. An execution number, if available, can also be used to search a client’s name.
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 Blog 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.
