206 Registration Of Transfer, Extension Or Modification Of Charges

FORMS

Application for Transfer of Charge

The director has approved the use of the Form C Charge for a transfer of charge. The Form 27 Transfer of Mortgage and Form 28 Assignment of Judgment were cancelled on January 1, 2017.

Submissions

On the Form C Charge, select Nature of Interest, Transfer of Charge, and complete data entry fields in the attached Terms of Instrument—Part 2.

PRACTICE

Transfers

Assignment of Agreement for Sale with Mortgage Back

Where a purchaser under a registered agreement for sale wishes to sell land under an instalment contract, the purchaser may assign the agreement and take a mortgage back for the outstanding balance. Registration of an assignment of an agreement for sale with mortgage back requires both a Form C General Instrument and a Form B Mortgage. An applicant files the assignment by way of Form C and the mortgage back by way of Form B.

Assignment of Rents

An assignment of rents may be registered in the same manner as a charge. Where the assignment is part of a mortgage, it can be registered with the mortgage using Item 5 of Form B. Alternatively, application to register the assignment of rents can be made in Form C either with the terms attached or with reference to filed standard charge terms.

Modification Agreements

It is important to note how the registrar interprets s. 206 of the Act in regards to an application for modification of a charge. Specifically, a modification application must modify the “terms” of a charge. For example, an application to modify a charge for the purposes of changing a party to the instrument does not result in a modification of a “term” of the charge and it is therefore not acceptable as an application to modify a charge under s. 206.

An application to modify the terms of a mortgage for the purpose of changing the principal amount, for example, is an acceptable application under s. 206 as this results in a “term” of the mortgage being modified.

This interpretation is consistent with applications to modify trust instruments under s. 180 of the Act. Applications to modify a trust instrument are also limited to the “terms” of the trust. An application to modify a trust instrument for the purposes of changing a party to the trust must be dealt with in accordance with the Trustee Act as opposed to an application to modify a term of the trust.

A modification must not be used to redefine the area of land encumbered by the charge. For example, an application to modify a Statutory Right of Way in an attempt to decrease the area of the land encumbered with the Statutory Right of Way is not deemed to be a modification under s. 206. In this instance, an application must be made to release the Statutory Right of Way from that part of the lands that is no longer required. Similarly, an application to extend a charge is required in those instances where the area of land subject to the charge is being increased.

Execution of Modification Agreement

To extend a charge over additional lands, only the mortgagor is required to execute a modification agreement. For all other modifications, the registrar requires all parties to execute the instrument that modifies the agreement.

Mortgagee’s Consent to Grant of Subsequent Lease in Event of Foreclosure

Where an instrument contains a mortgagee’s agreement to grant a subsequent lessee a new lease in the event of foreclosure, the registrar registers the instrument as a modification of the mortgage and notes in the remarks segment of the lease “and see # _____”. The subsequent lessee must join in the agreement.

Second Mortgage Subject to Subsequent Advances under First Mortgage

Where the parties to a second mortgage express it to be subject to a registered first mortgage, regardless of the date of execution or the time and order in which advances are made under the first mortgage, the registrar makes no entry of that fact in the register.

Transaction Code for Modification

The registrar marks up a modification of a charge with the transaction code “Modification” or MOD.

Priority Agreements

Separate Instrument Deals with Advances

Where a second mortgage does not itself deal with advances under the first mortgage but a separate instrument does, the registrar registers the separate instrument as a priority agreement. Only the second mortgagee, and not the mortgagor of the second mortgage, is required to execute the priority agreement.

Modification of First Charge Where Priority Agreement Not Required

Where an applicant applies to register a modification of a charge (for example, where the parties to a mortgage have agreed to increase the principal, increase the interest rate, or extend time for payment), the registrar does not require a priority agreement from the second mortgagee. Nor does the registrar require that the applicant mark the modification agreement as subject to the second mortgage. The law, and particularly ss. 27 and 28 of the Act, determines priorities between charges by the date of application for registration. Consequently, a second chargee or mortgagee may not be bound by the modification of a first charge or mortgage made by an instrument attached to and filed with a Form C.

Modification of First Charge Where Priority Agreement Required

The registrar requires a consent or priority agreement where there is a “British Columbia second mortgage” made under the Home Conversion and Leasehold Loan Act, R.S.B.C. 1996, c. 192 or the Provincial Home Acquisition Act, S.B.C. 1967, c. 39. Although these Acts have been repealed, transitional provisions are in effect under the Budget Measures Implementation Act, 2004, S.B.C. 2004, c. 14. See chapter 36 (British Columbia Home Programs Legislation).

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

Transfers

See s. 1 of the Act, which defines “transfer” as follows:

• “transfer” includes a conveyance, a grant and an assignment.

See also ss. 185 and 187 of the Act regarding the form of a transfer and registration of transferees.

Transfer of Interest in a Right to Payment

See s. 4(g) of the Personal Property Security Act, R.S.B.C. 1996, c. 359, which provides that that Act does not apply to:

• the creation or transfer of an interest in a right to payment that arises in connection with an interest in land, including an interest in rental payments payable under a lease of land.

Secondary Sources

See Di Castri, Registration of Title to Land, vol. 2, §12:24, §13:187, and §13:188.

CASE LAW

The petitioner, holder of a mortgage registered against land owned by the respondent, applied to court for a declaration in foreclosure proceedings that an unregistered agreement amending a long-term lease of the land be foreclosed upon the sale of the land. The land owner entered into the amending agreement with a third party. The amending agreement was executed before the land owner, the third party, and a lessee entered into an assignment of the lease to the third party. The assignment was registered in the land title office while the amending agreement was not. In upholding the amending agreement, the court found no reason as a matter of contract law why the parties could not execute an agreement conditional upon the completion of another transaction, in this case, the assignment of the lease. In fact, the execution of the amending agreement before the assignment of the lease made commercial sense. However, the court found that, because a covenant to pay rent was part of the original lease, an agreement to revise the amount to be paid constituted a modification of the charge to which s. 206 of the Act applied. As the petitioner was not a party to the unregistered agreement amending the lease and the covenant to pay rent, the court declared that the agreement would remain in effect as between the land owner and the third party only until the foreclosure of the land and that, upon the foreclosure of the land, the original lease would continue in full force and effect and bind both the third party and any subsequent purchaser (Standard Life Assurance Co. v. Royal Oak Holdings Ltd., 2005 BCSC 525).

The respondents owned property over which they granted a surface lease to a third party for the purpose of drilling for oil and natural gas. The lease was registered in the land title office. The property was sold and the purchaser and the respondents entered into an assignment of rents agreement entitling the respondents to continue to receive all rental payments under the lease. This agreement was executed in Form C and registered in the land title office. The purchaser eventually sold the property to the petitioners with no mention of the assignment in the documents of purchase and sale. The petitioners claimed that the assignment was merely a contractual agreement that did not survive the transfer of title. The respondents claimed that it was the intention of the covenanting parties to create an interest in land. The court found that, in the absence of specific legislation dealing with the status of an assignment of rents, the court must look to the common law and consider the intention of the parties at the time the assignment was executed. In this case, the court determined that the respondents and the third party intended to create a registrable interest in land. The assignment stated, “it was a term of the transfer of title” that the third party would grant the respondents an assignment. Under the terms of the assignment, the third party was allowed to assign the rental payments but only on the conditions set out in the agreement and the respondents’ interest in the rental payments was to survive even if the lease was replaced. Finally, the court found that the actions of the parties in preparing and filing the Form C in the land title office and in executing the assignment as part of their closing documents provided additional evidence of their intention to create an interest in land. Accordingly, the respondents were entitled to receive rental payments in accordance with the lease and the petitioners’ claim for relief was denied (McDonald v. Bode Estate, 2017 BCSC 515, affirmed 2018 BCCA 140).