On January 31, 2025, the Financial Statutes Amendment Act, 2024 (No. 2) (the “2024 Act”) came into force, introducing a significant change to how mortgage registration levies are calculated in Alberta. The most notable change is the repeal of Section 102.1(3) of the Land Titles Act, which previously allowed borrowers, in certain cases, to choose to base levies for the registration of a mortgage on the value of the land upon which the mortgage was being registered, rather than the principal amount of the mortgage itself.
This change has serious financial implications for lenders and borrowers, particularly those involved in large or multi-jurisdictional credit facilities. It does not, however, impact mortgages where the principal amount is equal to or less than the value of the land.
The Previous Approach
Before the 2024 Act, borrowers could submit affidavits to reduce registration levies if the appraised value of the land used as collateral was lower than the principal amount of the mortgage being registered.
By way of example, under the previous structure, a borrower registering a $50 million mortgage on land valued at $2 million would pay only $2,050 as the registration levy. This levy was calculated on a base charge of $50, plus $5 for each $5,000 of the land’s appraised value.
The New Approach
With the repeal of Section 102.1(3) of the Land Titles Act, registration levies are now based solely on the full mortgage principal, making the land’s appraised value irrelevant.
Using the same example, a borrower registering a $50 million mortgage on $2 million worth of land must now pay $50,050 as the registration levy, calculated on a base charge of $50, plus $5 for each $5,000 of the principal amount of the mortgage. This drastic increase significantly impacts borrowers financing property with mortgages exceeding land values, as may be the case where one mortgage is registered to cover both current and future advances, or where one form of mortgage, indicating the principal amount of a loan, is used across multiple provinces in a multi-jurisdictional transaction.
Additional Amendments
Pursuant to Section 102.1(4) of the Land Titles Act, where a mortgage is supplemental or collateral to an existing registered mortgage, or where a mortgage is a substitute for a subsisting registered mortgage, and in either case only if the lender remains consistent, levies do not need to be paid again in full. Rather, levies only need to be paid on certain increases in value.
Previously, for mortgages under Section 102.1(4), those additional levies could be paid on the additional principal amount secured by the mortgage or on the additional land or interest in land secured by the mortgage, in the case where the levy paid on the original mortgage had been based on the value of the land.
Now, the new Section 102.1(5) of the Land Titles Act prescribes that registration levies for supplemental, collateral and substitute mortgages under Section 102.1(4) are only based on the additional principal amount secured by the mortgage.
We are seeking clarification from the Alberta Land Titles Office with respect to how the levy will be calculated pursuant to Section 102.1(5) of the Land Titles Act in circumstances where the levy paid in respect of the existing registered mortgage was based on the land value, rather than the principal amount of the mortgage.
What This Means for Borrowers and Lenders
With the higher registration costs, we anticipate changes in mortgage structuring strategies, including:
- Individual Mortgage Registrations: Borrowers may opt to register separate mortgages for each parcel of land rather than a single large mortgage covering multiple properties.
- Principal Adjustments for Portfolios: For mortgages covering multiple Alberta properties, borrowers may seek to base principal amounts on the collective land value, though this may ultimately require amendments where land is later added or removed, and means that increases in land value may not be captured by the mortgage, which could be concerning for a lender.
- Different Documents for Alberta: In a large transaction involving mortgages in multiple provinces, lenders may need to update their documents to allow for the principal amount of the mortgage in Alberta to reflect the collective Alberta land value, rather than the overarching loan amount. This would require lenders to get comfortable with taking less security.
- Alternative Loan Structuring: Lenders may seek different forms of collateral to reduce excessive registration costs or to reduce risks associated with having smaller value mortgages in Alberta.
Transitional Provision
For those who submitted a mortgage to the Land Titles Office before January 31, 2025, registration levies will still be calculated under the previous rules. In other words, if an affidavit to reduce fees to reflect land value was submitted before this date, it will be considered in the levy calculation.
Navigating the Changes
The new levies took effect as of January 31, 2025, with little notice provided to the industry prior to implementation. Given the significant financial implications, lenders and borrowers will need to reassess their mortgage registration strategies quickly.
For those navigating these changes, consulting with commercial real estate and financial law specialist is crucial to understanding how to structure mortgages effectively under the new rules and minimize cost.
