Under the Registry system, a purchaser discovers an unregistered mortgage that predates their registered deed. The mortgage was properly executed but never registered. What is the legal effect?

Q: What is the correct answer to: Under the Registry system, a purchaser discovers an unregistered mortgage that predates their registered deed. The mortgage was properly executed but never registered. What is the legal effect?

The correct answer is The mortgage is valid only if the purchaser had actual knowledge of it. Option C correctly states the race-notice principle under the Registry system. In provinces using this system, an unregistered interest can still bind a subsequent purchaser if they had actual knowledge of it. The purchaser cannot claim to be a bona fide purchaser for value without notice if they knew about the mortgage. This principle balances the protection of registration with the equitable concept that one cannot benefit from willfully ignoring known encumbrances. The mortgage remains valid and enforceable against a purchaser with actual knowledge, regardless of registration status.

Q: What background knowledge is needed for this Real Property Law question?

The Registry system operates on a 'race-notice' principle where priority generally goes to the first to register, but only if they are a bona fide purchaser for value without notice. This differs from the Torrens system used in some provinces, which provides indefeasibility of registered title. Under the Registry system, actual knowledge of an unregistered interest defeats the protection of registration. The system requires purchasers to conduct thorough due diligence, as they may be bound by interests they actually knew about, even if unregistered. This principle is codified in provincial legislation and emphasizes that registration provides notice but doesn't cure knowledge-based defects in title acquisition.

Q: What is a good way to remember the answer to this Real Property Law question?

Knowledge Nullifies Ownership Without notice. In Registry systems, if you KNOW about an unregistered interest, you can't claim protection just because you registered first. Think of it like a game of musical chairs - even if you sit down first, if you KNEW someone else was already heading for that chair, you can't claim it fairly. When you see Registry system questions involving unregistered interests and subsequent purchasers, ask yourself: 'Did they KNOW?' If yes, the unregistered interest likely binds them. If no actual knowledge, registration typically provides protection.

Q: What exam tip applies to this Real Property Law question?

For Registry system questions, always check for actual knowledge. The key phrase is 'actual knowledge' - if the purchaser knew about an unregistered interest, they're bound by it regardless of registration timing.

Q: How does this Real Property Law concept apply in real world practice?

A buyer purchases a property and registers their deed immediately. During renovations, they discover the previous owner had granted an unregistered mortgage to a private lender, and the buyer's lawyer had actually mentioned this during the transaction but the buyer proceeded anyway. Despite registering first, the buyer takes subject to the mortgage because they had actual knowledge. This scenario emphasizes why real estate professionals must ensure clients understand all disclosed encumbrances and consider title insurance for additional protection.

Question

Real Property LawLand Registration SystemsONHARD

Under the Registry system, a purchaser discovers an unregistered mortgage that predates their registered deed. The mortgage was properly executed but never registered. What is the legal effect?

Answer Options

A

The mortgage is invalid because it was not registered

B

The purchaser takes subject to the mortgage despite lack of registration

C

The mortgage is valid only if the purchaser had actual knowledge of it

D

The purchaser's title is clear because they registered first