Picture this: You’ve lived in your home for 20-years and it’s now time to sell. You listed your home, found a buyer and signed an agreement. As you reach the final steps in closing your transaction, your lawyer informs you that $30K of your proceeds will be going to the company that installed your furnace and hot water tank a few years ago. Dazed and confused, you try to find that contract you signed for your furnace, not recalling that at any point in time, you actually agreed to pay such an absurd amount.
This unfortunate scenario isn’t made up. It’s been happening to thousands of Ontarians, causing stress, anxiety, and absurd amounts of money being paid to companies who may have duped innocent homeowners to thinking they are getting a great deal and a worry-free way to upgrade their homes, but rather, they are signed up to a “ball-and-chain” type of scheme that has them on the hook for tens of thousands of dollars.
You must be asking yourself, how is this legal? Most of these companies use a tool called NOSI (notice of Security Interest). Let’s dig in further…
What is a NOSI (Notice of Security Interest)?
A NOSI is similar to a lien. It is a legal tool once used by legitimate businesses to secure payment for home appliances such as furnaces or hot water heaters. Typically, when you sign a contract with a service provider that may install a furnace, hot water heater, or a water filtration system and opt for the service provider’s payment plan, rather than paying a hefty bill outright, that company may register a NOSI on the title (ownership record) of your property in order to protect their interest if you should ever default on your payments or sell the property while the contract is still in force.
While the benefits of essentially “leasing” a furnace are that you don’t have to pay for the furnace and installation outright, it usually ends up costing you much more in the long run. Typically, these companies capitalize the purchase price and interest for the next 20 years, which may mean that for a furnace that could cost $5,000 if purchased outright, could end up costing $20-30K over the course of 20-years.
To be clear, there’s nothing wrong with the scenario above. It is very similar to leasing a car, buying things on credit, or even paying your mortgage. The cost of money isn’t free and you are paying for borrowing those funds.
Why are NOSIs used?
Traditionally, NOSIs were utilized by legitimate businesses as a means to secure payment for home appliances, such as furnaces, air conditioning units, or water heaters. This legal tool acted as a safeguard, ensuring that companies received compensation for their products or services. However, as with many things, what began as a legitimate practice soon morphed into something altogether more sinister.
NOSIs are used frequently. Ontario’s Minister of Public and Business Service Delivery recently said he was aware of $1 billion worth of NOSIs recorded in the province.
What is the problem with NOSIs?
Lately, unscrupulous actors have twisted the purpose of a NOSI, using it as a means to exploit unsuspecting homeowners. Here's how it works: Let's say you finance a new furnace installation through a company that seems reputable. Little do you know, buried in the fine print of the contract is permission for the company to slap a NOSI on your property title. Fast forward to selling your home, and you're hit with a bombshell – you owe thousands of dollars to the company, thanks to the NOSI.
Take the case of Jane, a homeowner who fell victim to this scheme. She purchased a high-efficiency furnace for her home, unaware of the NOSI lurking in the contract. When she decided to sell her house to relocate for work, she was shocked to learn about the NOSI on her property title. Despite the furnace costing only a fraction of the amount demanded by the company, Jane found herself in a bind, forced to pay up to close the deal. The stress and financial strain left her feeling helpless and frustrated, wishing she had known about the NOSI before it wreaked havoc on her plans.
How NOSIs Became a Tool for Scammers
In recent years, NOSIs have become synonymous with deception and exploitation. Scammers, posing as reputable businesses, exploit homeowners' trust and lack of legal knowledge to insert NOSIs into contracts, often without the homeowner's full understanding or consent. These deceptive practices can have dire consequences for unsuspecting individuals.
What’s changing about NOSIs?
The Ontario government has announced that it will be banning liens placed on property in exchange for certain household appliances sometime in the spring.
The goal of the legislation is to prevent scams in which Notice of Security Interests (NOSI) are applied without a homeowner’s knowledge when they purchase or rent HVAC appliances such as furnaces or air conditioners. It will also remove all existing NOSIs from the Land Registry.
How do I know if I have a NOSI (Notice of Security Interest) on my home?
A NOSI will typically appear on a title search of your home. The title records for your home are typically held with a provincially run land registry. By searching the title of your property, you can identify any registrations that may be held against your property's title such as mortgages, notices of security interest, liens, and more.
The simplest way to search your title is to contact a Real Estate Lawyer and have them conduct a title search on your property to verify if a NOSI has been registered on the title of your property. A lawyer will also review your title for any unexpected surprises.
At Deeded, our network of friendly Real Estate Lawyers can help you search your title for NOSIs or any other suspicious items quickly and easily. The fee our lawyers charge for searching and reviewing your title is $299 + HST and includes the service charges from Teranet for title searches.
If you are interested in having your property’s title searched for NOSIs or any other title issues, please contact us.
What if I have a NOSI and I plan to sell my home?
Homeowners with a NOSI typically have two options when encountering a NOSI while selling their property. They can either negotiate the NOSI, or pay it out.
Given the tight timelines of a real estate closing, it may also not be possible to have the time and runway to reach a negotiated outcome. The company who has registered the NOSI often knows and understands you may be under a tight timeline to close (or face default) and may be inclined to take advantage of your situation by refusing to negotiate.
If you suspect you may have a NOSI registered, your bet would be to verify the fact through a title search and start the negotiation process as early as possible to increase your chances of negotiating a better outcome.
The Bottom Line
With over $1 billion worth of NOSIs recorded on the title of properties across the province, What started as a legitimate tool, has now caused Ontario homeowners a lot of grief and stress, As NOSIs potentially get abolished by the Ontario government, there is are still many homeowners who may discover major issues when they go to sell or refinance their home.
At Deeded, our network of friendly Real Estate Lawyers can help you search your title for NOSIs or any other suspicious items quickly and easily. The fee our lawyers charge for searching and reviewing your title is $299 + HST and includes the service charges from Teranet for title searches.
If you are interested in having your property’s title searched for NOSIs or any other title issues, please contact us.
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