New/Old Land Titles Fees Coming July 1, 2015 – Collateral Mortgage Damage

THINK OUTSIDE THE BOX:  With the most recent Alberta Budget a number of user fee tax increases were announced, the most pointed for us being the increase in Land Titles registration fees.

In case you missed it, effective July 1, 2015, Albertans are getting an increase in transfer and registration fees as follows:

1. Land title search including online search – From $10 to $15
2. Land Title Caveats – From $30 – $35
3. Transfers and leasehold titles – Flat fee From $50 to $75
4. Transfers and leasehold titles – variable fee per each $5,000 – From $1 to $6
5. Mortgages- Flat fee from $50 to $75
6. Mortgages- Variable fee per each $5,000 – From $1 to $6

What does this mean to you and your clients?

It is important to understand the history of the LTO fees before passing judgment. Before 2005 the standard fee was set as a flat $25 for a transfer and $35 for a mortgage + a variable fee of 0.1% of the total value for both. That effectively meant that you paid the flat rate portion plus $100 per $100,000 of value of both the Transfer and the Mortgage for the purposes of registration.

In 2005 this was reduced to 0.02% as a variable portion but the fixed rate portion was raised to $50. That meant that you would pay $50 plus $20 per $100,000 of value. This has now been raised to $75 + 0.12% of the value or $75 + $120 per $100,000 of value – the impact will be fair sudden because of the size of the increase even though it really is a return to old rates.

An example will help you sort this out. Take a $500,000 property with a $400,000 mortgage. The cost to register under both systems is as follows:

Pre July 1
1. Transfer = $50 to register + 0.02% of the $500,000 = $150
2. Mortgage = $50 to register + 0.02% of the $400,000 = $130
3. Total = $280

Post July 1
1. Transfer = $75 to register + 0.12% of the $500,000 $675
2. Mortgage = $50 to register + 0.12% of the $400,000 or $555
3. Total = $1,230

The recent changes are going to have a significant impact mainly because buyers have been weaned onto the lower fees. When you account for inflation, etc. the “new” fees are really a return to the “old pre-2005” fees but until people get used to the changes there will be real concerns voiced by our clients.

The most important issue for the real estate profession will be how to deal with lenders that register collateral mortgages at the appraised value of the property rather than the amount that the client borrowed. This has always been sold as a “making it easier to borrow in the future” argument but now there will be a real and substantial cost to this process because the variable cost at LTO is based on the value outlined in the document registered and NOT the amount advanced.

Effectively, if you borrow 75% of a $1,000,000 property and the lender approved and registers a collateral mortgage for the appraised value, you are paying LTO fees on the $250,000 you actually did not borrow or $300 more of your hard-earned dollars.

In the end, Alberta is the most affordable place to do property transactions in Canada but that means very little when clients simply see the sudden increases they are about to face.

It will be interesting to watch this unfold but for now, the suggestion is that you let your clients know of this issue to try and avoid additional costs they don’t really need to incur. If their lender insists on registering for the full value of the property your clients need to ask as to who will cover the additional costs of registration of that mortgage – don’t let a collateral mortgage become collateral mortgage damage!

Ron Thibeault, Partner, LeClair Thibeault, Barristers & Solicitors

 

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