Summary
When the mortgage registration amount is greater than the land value, the Land Titles levy in Alberta is based on the land value and not the mortgage registration amount.
What legal teams need to know.
It is not uncommon for collateral mortgages to have a registration amount that exceeds the purchase price of the property if the lender deems the "full value" of the property to be greater than the purchase price. Legal teams could see this in foreclosure and new build settings and other scenarios where the closing of the transaction takes place some time after the negotiation of the purchase price.
Collateral mortgages have registration amounts that exceed the actual amount borrowed at the time of funding. A commonly stated advantage of a collateral mortgage is that it may provide flexibility to borrowers to obtain additional money in the future without having to register a new mortgage on title to the property.
Lots for legal teams to consider when providing advice on collateral mortgages, but with the changes on October 20, 2024 to Alberta's Land Title Levy for mortgages, legal teams need to pay attention to their Land Titles bills.
Section 102.1(3) of the Land Titles Act creates an exception from the standard levy of "an amount equal to $50 plus $5 for each $5000 or portion thereof" of the registration amount of the mortgage.
Section 102.1(3) indicates that where the mortgage registration amount is higher than the land value, the land value is substituted for the registration amount in the levy calculation.
This means legal teams need to be aware of what they should be paying and ensure that they are not overcharged in these circumstances.
Example
Person A enters into a contract build a new property in 2023 for $350,000. By the time of the closing of the purchase in 2024, the property value has increased to $400,000. Person A has negotiated a collateral mortgage with her bank with a registered amount for the total current property value of $400,000.
The land titles levy should be:
$400 for the transfer and $400 for the mortgage.
However, legal teams will want to ensure that the standard calculation (mortgage amount) is not applied because land titles levy would be:
$400 for the transfer and $450 for the mortgage.
This means the legal team is potentially $50 out of pocket on their Land Titles bill and now has to either approach the client for the additional $50 post registration or eat the expense or challenge the invoice received from Land Titles.
Prolegis Works for You. Rather than leave you in a situation where you are out $50 or hundreds of dollars, Prolegis applies the mortgage amount to the transaction in every mortgage registration. That way, if when auditing your expenses, you discover that you've collected more than required to satisfy the Land Titles levy, you are able to return funds to your client, rather than being in a position of not having enough to pay the Land Titles bill.
References
Section 102.1(2) and (3) of the Land Titles Act https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-l-4/
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