Ontario legislation eliminates NOSIs

By Jonathon Harp

On Monday May 27, 2024, the Ontario government introduced new legislation that removes the ability to place Notices of Security Interest (NOSIs) for consumer goods in the land registry process. The legislation received Royal Assent on June 6.

NOSIs were originally used by companies who leased or rented household goods such as HVAC equipment and appliances for a home to “protect themselves when such appliances were purchased with financing,” according to the government.

Entitled “the Homeowner Protection Act (HPA), ” this legislation will eliminate new NOSIs as well as all NOSIs currently in place. According to Todd McCarthy, Minister of Public and Business Service Delivery, the current value of the NOSIs in place adds up to around $1 billion. The HPA is a comprehensive piece of legislation that also includes a mandatory 10-day cooling off period on home purchases and “public disclosure when builders cancel purchase agreements.”

Since the early 2000s, the number of NOSIs has grown from around 2000 per year to more than 58,000 in 2023. This huge jump is attributed to use of this legal tool to deceive and essentially “scam” the public. In many circumstances NOSIs are placed on the land registry without notifying the homeowner and listed at a dollar figure far greater than the product’s actual worth.

“Homeowners usually discover NOSIs when they want to sell or refinance their homes, and then bad actors exploit this by demanding exorbitant fees to discharge them,” says McCarthy.

NOSIs: Legally speaking

When a product or piece of equipment on a property is leased or rented from a third-party company, Ontario law calls this a “fixture.” To protect a company’s ownership of the fixture, a NOSI could be used to register the fixture on the land registry. It is not a lien which requires payout of a certain value when the property is sold. The NOSI is simply a notice that the property includes a fixture owned by a third party.

NOSIs affected everyone in property transactions from borrowers to mortgagees. However, it significantly impacted homeowners when they were selling or refinancing their home. Typically, any NOSIs on the property needed to be discharged prior to completing such a transaction.

As noted previously, registry of NOSIs have been identified by unscrupulous vendors as a method to “scam” unreasonable funds from homeowners when the home is sold or refinanced months or often years after the NOSI was registered.

What does this mean for the HVAC sector

The regulation concerning NOSIs is part of the Ontario Personal Property Security Act (PPSA). All other provinces and territories have similar PPS acts and regulations. With Ontario’s legislation receiving Royal Assent other provinces and territories may look at changes to their PPSAs.

Leasing, renting and financing of HVAC equipment i.e., furnaces, air conditioning and water heaters, is happening in Ontario and a number of other provinces. Statistics on how many homes in Canada have rented or leased HVAC equipment are not collected. However, as an example, if approximately 1/3 of homes in Canada are rented (about five million), StatsCan statistics estimate that 18 per cent of these homes have an added cost in the monthly rent for air conditioning.

Another issue that is not known at this point is an estimate of the number of HVAC contractors or vendors in Ontario that used NOSI to protect their interests in leased, rented or financed equipment.

This is Part 1 of the story on NOSIs and the  Ontario Homeowners Protection Act. Look for Part 2 shortly.

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