A certificate of pending litigation (a CPL) is a form of charge that can be registered on title to land where someone commences a legal claim in which they assert an interest in that land. CPLs are intended to protect the claimant’s interest in that land. For example, if a plaintiff asserts money they lent was used to purchase or maintain land, they will claim a CPL. Similarly, a purchaser will claim an interest in land where their vendor later tries to get out of the sale.
As a practical matter, a CPL is an effective tool in tying up land and putting pressure on its owner to resolve the dispute. It is unlikely anyone else will deal with the land if there is a CPL on title. For example, no one else is likely to buy the land and no lender will take mortgage security because, if they do, their interest in the land will be subject to the yet-to-be adjudicated rights of the CPL holder.
CPLs are often used as a veiled method of leverage to secure a financial claim or a tenuous interest in land. What, then, happens if there is a CPL on title to your land and you need to get rid of it? How do you go about that?
Absent agreement with the CPL claimant, your recourse is to seek a court order removing the CPL. Section 256 of the Land Title Act grants a land owner the authority to apply to court to remove a CPL. On such an application, the court may cancel the CPL outright, do so on term that security be posted instead, or may refuse to cancel the CPL but require the CPL claimant to either post their own security or give an undertaking to pay damages if their claim ultimately fails.
On such applications, a threshold question is whether the land owner can demonstrate “hardship and inconvenience” as a result of the CPL. The hardship and inconvenience must be more than trifling or insignificant. For example, if the CPL is thwarting a sale, preventing development of the land or stalling a financing, then “hardship and inconvenience” may well exist. The next question is whether or not the land owner can establish that an order requiring security is proper and that damages will provide adequate relief to the CPL claimant rather than the land itself. For example, if the claim is only about monies owed to a contractor, damages will suffice.
However, if the claim is for specific performance of the sale of a unique parcel of land, damages will not be an adequate remedy. Where the claim is for specific performance, it must be plain and obvious that it will not succeed in order to have the CPL cancelled. However, the CPL claimant must also prove readiness and willingness to perform their contractual obligations. This includes continuing of future obligations of the purchaser that are interdependent and to be performed concurrently with obligations of the vendor that the purchaser seeks to enforce. In other words, if you needed financing to complete the purchase but have not or cannot obtain it, the specific performance claim will fail, even if the land is “unique.” In cases like this, the fight over cancelling the CPL will revolve around the issue of whether or not the subject property is sufficiently “unique” that specific performance is an appropriate remedy.
If a purchaser is not entitled to specific performance, then it follows that damages are an adequate remedy. The CPL will be cancelled. If a CPL is cancelled and replaced by posting security, then the court will need to set the amount of the security. It will not always be the amount of the claim. The amount depends, among other things, on the strength of the case.
If you seek to remove a CPL from your property, you will need to analyze the underlying claim and assemble the evidence necessary to convince a judge there is little or no merit to it. You will also need to be prepared, and should consider proposing, an amount of security to post as an alternative.