what is a zombie deed?
A “zombie” deed is a deed of property that was signed during the owner of the property’s lifetime, but registered in the land title system after the death of the owner as though they were still alive. In a sense, the now deceased owner’s wishes with regards to the disposition of the property would be “resurrected” posthumously. Technically, this is referred to as a posthumous registration, but for simplicity we will refer to it as a “zombie” deed.
For years, this practice generated controversy, but today, the bottom line is that the intentions of a dead person cannot be resurrected! The Director of Titles in Ontario, Jeffrey Lem, has enacted a strict policy that so-called “zombie” deeds may not be registered under any circumstances, absent a court order or other direction from a trier of fact.
Typically, the “zombie” deeds occur where a property owner signs a document called an “Acknowledgement and Direction.” In the context of a sale or disposition of land, an Acknowledgement and Direction instructs parties as to the transfer of land; however, the transfer is registered only after the owner’s death. It has been the case that many Ontario lawyers have relied on their client’s authority via the Acknowledgement & Direction in order to effect the transfer of land within the electronic land registry database.
Let’s look at some examples.
Why Do Zombie Deeds Occur?
These types of deeds have often been used as an estate planning tool to try to avoid paying the Estate Administration Tax, namely probate.
Zombie deeds have also been used as a way to hide or avoid disclosure of the transfer of property to another party, such as a spouse. In other instances, the documents effecting the transfer of property may have been properly signed but left unregistered simply as a result of a lawyer’s negligence. Acknowledging the absurdity of acting on the unsubstantiated wishes of a dead person, courts have ruled that the zombie deed practice is not permitted.
For example, if an owner is on his death bed, he might consult their lawyer about what to do with their property. The lawyer would typically have the property owner sign their deed before the closing date of sale of the property and would hold it until the closing day. The lawyer then registers the deed on closing day. And, if the owner passes away before closing of the transaction, the transaction could still “close” as planned and on time, without the need for probate.
Although previously accepted, the practice of registering zombie deeds has been disallowed. When discovered, the Registry Office will no longer permit their registration.
What do the courts say?
In 2015, a particular case involving the zombie deed practice received court approval due to a simple oversight, even though it included genuine intention to transfer property. In Winarski v. Sproul (2015), a property owner executed a transfer and left it with her lawyer, intending for it to take effect immediately.
Due to the lawyer’s mistake, the transfer was never actually registered. The existence of the property transfer came to light years later, after the owner had passed away. The court ultimately ruled that the transfer effected pursuant to the deed in question (in effect, a Zombie Deed) was valid.
Interestingly, in this instance, the court did not consider that the context surrounding the registration of a zombie deed. The Superior Court of Justice did not consider the effect that unregistered deeds have on the electronic Land Titles Registry System, which is founded on the principle that that which is shown on the Registry indeed reflects the “true state” of title ownership.
The practice of recognizing transfers effected pursuant to zombie deeds, in effect, bypasses this principle. Nonetheless, for some time now, the Director of Titles in Ontario has expressed that such transfers will be rejected by the Land Registry Office.
In March of 2020, the Ontario courts finally addressed directly, the growing and pervasive issue of zombie deeds. In Thompson v. Elliott Estate (2020), the Superior Court of Justice court considered a scenario where a posthumous transfer of a matrimonial home was registered on behalf of a deceased woman by her lawyer, shortly after her death.
Given that the home was a matrimonial home owned jointly by the woman and her husband, the transfer effectively severed the joint tenancy and her husband took issue with the result, seeking a court declaration that he held 100% interest in the property, by virtue of the right of survivorship guaranteed by a joint tenancy arrangement.
By the time the matter reached the courts, the property had already been sold to a third party, with the cooperation of both the husband’s and the wife’s (who had since also passed) estate. The issue was whether the wife’s estate was entitled to a 50% interest in the net proceeds of the sale of property as the estate could be considered a tenant-in-common.
Ultimately, the judge ruled that the transfer was valid, and that the recipient transferee was the owner of the land. The judge’s analysis can be broken down into two components: (1) the signing of the deed; and (2) the registration of the deed (transfer). On the one hand, in acknowledging the Winarski case, the judge distinguished Winarski in that the transfer in question was never registered and was executed in a Registry form before the property was converted to Land Titles, unlike in the Thompson case.
On the other hand, the court recognized that the deed had been signed and was therefore valid, and that the joint tenancy was severed. In other words, the estate and husband were to be considered tenants-in-common, each entitled to 50% of the net sale proceeds.
In reaching its conclusion, the court considered that the intention and validity of the transfer as between parties is determinable as of the date of the execution of the transfer, as opposed to its registration. Given that the deceased had intended to sever the joint tenancy prior to her death, her intention was honoured. She expressed that she wanted her children to inherit her 50% interest in the house.
This intention was evidenced by the fact that, prior to her passing, the deceased met with her lawyer in hospital and signed the relevant documents. In this regard, the fact that the transfer was not registered prior to the deceased’s passing was irrelevant, given that this had not occurred due to error and oversight on the part of her lawyer.
The court then considered the lawyer’s posthumous registration of the transfer (i.e. following the deceased’s death), in his attempt to rectify the error. It was noted that lawyers who find themselves in similar situations should, rather than enter a registration posthumously, bring an application requesting a Certificate of Pending Litigation, a Declaration of an interest in land, and a vesting order under section 100 of the Courts of Justice Act.
In essence, a lawyer cannot, under any circumstances, register a signed deed/transfer by a deceased owner because, by doing so, they are guilty of making a false law statement. For instance, registering a law statement which states that a deceased person is “over the age of 18 years and a spouse” is false, as he or she is in fact deceased, at the time of registration. Therein lies the problem with zombie deeds: they produce registrations that are based on false and/or inaccurate law statements.
Aura LLP is experienced in navigating registration of title ownership and estates issues, and we have helped our clients address issues with “zombie” deeds when dealing with estate administration. Contact us for a free consultation.
