The Alberta Government Proposes to Change the Cost of Registering a Mortgage

December 03, 2024

Written By Michael Ramsay, Denise Bright and Alixe Cameron

There is a potentially expensive fee change on the horizon here in Alberta that may catch lenders and borrowers with large and/or multi-jurisdictional credit facilities unaware.This change will affect mortgages (collateral or otherwise), debentures and trust deeds (collectively Mortgages), plus supplemental or replacement Mortgages, and any caveats claiming an interest under a Mortgage or unregistered Mortgage. 

It is common for lenders to require borrowers to register collateral mortgages over real property (the Land) as part of the security given by the borrower to support the lender providing the credit facility. Often, the principal amount on the face of the mortgage is equal to or in excess of the credit facility limit, regardless of the then current value of the Land it is registered against.This ensures that if the value of the Land increases during the term of the credit facility, the lender’s security includes such increase in value, up to the face value of the mortgage.

The prescribed fees set out in the Land Titles Act (Alberta) (the LTA) were increased on October 20, 2024.Please see our blog Open Your Wallets Wider! Increases to Alberta Land Transfer and Mortgage Registration Fees Coming for more details, however for the purpose of this blog, the relevant fees are for the registration of a Mortgage, which, other than pursuant to certain reductions, is a base fee of $50, plus $5 for each $5,000 or portion thereof of the principal amount.¹ It is these reductions that are now proposed to be repealed, with significant consequences.

When the value of Land is less than the principal amount of the Mortgage, the borrower can apply to adjust the prescribed fee calculation to be based on the value of the Land rather than the value of the Mortgage.² However Section 9(4)(c) of the recently introduced Bill 32 repeals the section of the LTA that provides this fee reduction.³

Implications of Bill 32 on the Prescribed Fees

If Bill 32 is passed, the prescribed fees for a Mortgage will be solely based on its face value.  While this does not affect Mortgages to be registered against Lands when the Mortgage is equal to or less than the value of the Lands, it does affect credit facilities under which this Alberta Mortgage and the Alberta Land is only one collateral component. The easiest way to explain the ramifications of this amendment is to provide an example:

Company A has a credit facility for $100 million for its business, which includes stores in multiple provinces. One of the stores is located in Alberta on land owned by Company A, which land has a value of $5 million. Company A's lender requires the registration of a mortgage with a face value equal to the total value of the credit facility. Concurrently with submission for registration of this $100 million mortgage, Company A includes a statutory declaration for the reduction of the prescribed fees, confirming that the fees should be based on the $5 million value of the land, rather than the face value of the mortgage.  The total prescribed fees would therefore be $5,050.

However, if Bill 32 is passed, then, despite the lands only being worth $5 million, the prescribed fees for the same mortgage will now total $100,050. A 20x increase in fees.

The writers have seen collateral mortgages as large as $12 billion, which, if Bill 32 is passed, would result in an astonishing prescribed fee of approximately $12 million.

Fee Comparison in Saskatchewan and British Columbia

For comparison as of the date of this post, in Saskatchewan, the registration fees for a mortgage are $180.00 for the first four titles, interests or shares, plus $55.00 for each additional title, interest or shares.⁴ If only one parcel of land is affected, then the registration fee costs for the same example mortgage of $100 million would just be $180.00. In British Columbia, registration fees for a mortgage are even lower, as of the date this post, the fees are published at a flat fee of $81.27 per mortgage, regardless of the number of titles affected.⁵

We expect that, if Bill 32 is passed and the mentioned changes come into force, where there is a significant difference between the total amount of the credit facility and the value of the Lands, lenders will be required by the borrowers to amend their practice in Alberta to limit fees payable and shall no longer require borrowers to register mortgages at the face value of the credit facility. This will result in individual mortgages being drafted specifically for each parcel of Land and registered rather than aggregate Mortgages in excess of the current land values. This will add extra costs to the borrower for their lawyers to prepare these specific documents, and extra administrative headaches as now each parcel in Alberta may have a separate mortgage (and therefore separate registration number) for each parcel of Land they own.

Additional Reductions Potentially Removed by Bill 32

We also note that these prescribed fees are not necessarily a one-time cost, as a borrower may refinance with other lenders, which may result in paying out the existing mortgages on the Lands and putting new Mortgages in place. A lender may also require an increase or supplemental mortgage to the current Mortgage, all of which currently used to have the ability to apply for a reduction based on a statutory declaration confirming that the new registration is for the same parties as the previous Mortgage and that the prescribed fees had already been paid in relation to that Mortgage. If Bill 32 is passed, it is likely that borrowers and lenders will attempt to amend already existing Mortgages rather than refinance, which would require a discharge and then a new registration (at full prescribed fees) to limit the impact of fees payable. In addition, we expect that lenders will seriously consider amending Alberta mortgages to reflect increased land values at the time of any amendment, and, in particular, an increase to credit facilities. 

Conclusion

We are not certain whether this portion of Bill 32 will be passed, and if it is, exactly when the repeals to the LTA as set out therein will take effect. While there is no guarantee of advanced warning, we are hopeful that the Government of Alberta will, like they did with the increase to the prescribed fees back in October 2024, provide at least a few weeks' notice of when the Mortgages submitted will now be captured by this new fee structure. The proposed amendments do provide that Mortgages filed but not yet registered will not be subject to the new fee structure.

While this Bill solely affects Alberta Lands, as many collateral mortgages are registered pursuant to the security requirements of a national or global credit facility, it is imperative that lenders, borrowers and lawyers in other jurisdictions are made aware of this potential change so that any credit facilities being negotiated contemplate the possibility of the Alberta Mortgage not being registered at the face value of the credit facility.

Our national Commercial Real Estate group and Financial Services group are here to answer any inquiries you may have in relation to this Bill 32 and its potential ramifications to the registration of Mortgages in Alberta.  Please do not hesitate to contact the authors if you have further questions regarding the information above.

Authors