What happens to a mortgage when property ownership is transferred through Alberta's Land Titles system?

Q: What is the correct answer to: What happens to a mortgage when property ownership is transferred through Alberta's Land Titles system?

The correct answer is The mortgage remains registered against the property unless specifically dealt with. Option C is correct because under Alberta's Land Titles Act, mortgages are registered as encumbrances against the property, not the owner. The Torrens system used in Alberta ensures that all interests in land, including mortgages, remain registered on title regardless of ownership changes. The mortgage stays as a charge against the property until it is specifically discharged by the lender, assumed by the new owner through proper legal process, or otherwise dealt with according to the terms of the mortgage and applicable legislation.

Q: What background knowledge is needed for this Mortgage & Real Estate Finance question?

Alberta uses the Torrens Land Titles system, where the government guarantees title and all interests in land are registered. Mortgages are registered as encumbrances against specific parcels of land, creating a charge that runs with the property regardless of ownership. This system provides certainty and protection for both lenders and subsequent purchasers. The Land Titles Act governs registration procedures and establishes that registered interests have priority based on registration order. Real estate professionals must understand that title searches reveal all registered encumbrances, including mortgages, and that these must be addressed during transactions to ensure clear title transfer.

Q: What is a good way to remember the answer to this Mortgage & Real Estate Finance question?

Think of a mortgage like a sticky note attached to the property deed. Just like a sticky note stays attached to a document when you pass it to someone else, the mortgage 'sticks' to the property when ownership changes. The new owner receives the property with the sticky note (mortgage) still attached unless someone specifically removes it. When you see questions about mortgage transfers or property ownership changes, visualize the sticky note concept. Ask yourself: 'Does the sticky note (mortgage) automatically fall off, get transferred to the new person, or stay stuck to the property?' The answer is always that it stays stuck to the property.

Q: What exam tip applies to this Mortgage & Real Estate Finance question?

Look for key phrases like 'registered against the property' and 'unless specifically dealt with.' Remember that in Alberta's Land Titles system, mortgages follow the property, not the person. Always consider what happens to the registration, not just the debt.

Q: How does this Mortgage & Real Estate Finance concept apply in real world practice?

A buyer purchases a home with an existing mortgage of $200,000. During the transaction, they can either: arrange for the seller to pay out the mortgage at closing using sale proceeds, assume the existing mortgage (with lender approval), or purchase subject to the mortgage (taking title with the mortgage remaining). Regardless of the chosen approach, the mortgage registration stays on title until the lender provides a discharge. The buyer's lawyer will ensure proper handling during the closing process to achieve clear title or properly document any assumptions.

Question

Mortgage & Real Estate FinanceLand Titles MortgagesABMEDIUM

What happens to a mortgage when property ownership is transferred through Alberta's Land Titles system?

Answer Options

A

The mortgage automatically transfers to the new owner

B

The mortgage must be discharged before transfer

C

The mortgage remains registered against the property unless specifically dealt with

D

The mortgage becomes void upon ownership transfer