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?
Correct Answer
B) The mortgage is valid only if the purchaser had actual knowledge
Under the Registry system's race-notice principle, an unregistered interest can still affect a subsequent purchaser if they had actual knowledge of it. Unlike the Torrens system, the Registry system does not provide absolute protection against unregistered interests, making due diligence crucial.
Why This Is the Correct Answer
Option B 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.
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Under Ontario's Registry system, a purchaser discovers an unregistered deed that predates their registered deed. What is the likely outcome?
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Under Ontario's Registry Act, an owner sells a lot to Party A, who does not register the deed. Later the owner sells the same lot to Party B, who pays value, has no actual notice of A's deed, and registers first. Who has priority?