Zombie deeds: The undead of the real estate world

Editor's Note

This article is sponsored by Perley-Robertson, Hill & McDougall.

Fittingly, during the initial onset of the current COVID-19 pandemic – which began in a similar fashion to the way zombie plagues often seem to get their start in the movies – a new case from the Ontario Superior Court reawakened the debate on the validity of so-called “zombie deeds.”

With Halloween fast approaching, now seems to be an opportune moment to revisit this interesting aspect of real estate law. 

What is a zombie deed?

A zombie deed is a property deed signed during the grantor’s lifetime, but not registered until after their death. Some lawyers used zombie deeds as an estate planning method to avoid probate fees.1 For example, an elderly person who planned to transfer their property to their child after passing away would sign the deed and then the lawyer could register it upon their death, even years later. Zombie deeds have also been used in situations where the seller of a property dies after a real estate transaction has been entered into, but before the actual closing takes place. With a signed deed in hand, a lawyer could theoretically still transfer the property, even if the owner had passed away.2

Are zombie deeds valid?

It depends on who you talk to.

According to Ontario’s director of titles, Jeffrey Lem: “Zombie deeds are improper. Period.”3

The Ontario Superior Court has provided contrasting rulings. Winarski v Sproul in 2015 seemed to accept the use of zombie deeds, while Thompson v Elliott Estate this past April rejected them.

Winarski v Sproul

In Winarski v Sproul,4 Ann Sproul and her son James each owned a portion of a house. Ann signed a deed to transfer her interest in the house to James, but the deed could not be registered until a minor title issue was resolved. James did not resolve the title issue and Ann died before the transfer was registered. Ann’s will left the estate to James and his sister Marilyn, equally. Marilyn claimed that the unregistered deed to the house was invalid and that the property should be divided equally.

The Court found that the deed was valid. Ann had capacity at the time she signed the deed to make a gift of her interest in the property to James. She intended to give her interest to James. The failure to register the deed did not have the effect of legally voiding the transfer. Since the transfer was valid, the property was not included in the estate’s assets.

To qualify as a Winarski transfer, the transfer and delivery of the deed must be unconditional and irrevocable, and stated to be a gift.5 This decision did not, however, address the consequences of unregistered deeds on the Land Titles registration system which is based on the principle that what is shown in the system reflects the true state of title.6

Following this case, Lem took the position that zombie deeds are no longer eligible for registration and will be rejected by the land registry office if discovered.7 This statement left many wondering whether Winarski was still considered good law. 

Thompson v Elliott Estate

Thompson v Elliott Estate8 provided a contrary conclusion on zombie deeds to the one reached in Winarski. In this case, Elliott signed a deed prior to her death for the purposes of severing joint tenancy with her husband. However, the deed was not registered due to an error on the part of Elliot’s lawyer. This error was only discovered after Elliot’s death, and upon discovery the lawyer immediately registered the document. When this was discovered, Elliot’s husband sought a declaration that the registration was invalid and he held a 100 per cent interest in the property by right of survivorship. The property had been sold by this point, so the question was whether the estate was entitled to 50 per cent of the net sale proceeds as a tenant in common or whether Elliot’s husband was entitled to 100 per cent of those proceeds by right of survivorship.

For our purposes, the court broke its analysis into two components: (1) the actual signing of the deed; and (2) the registration of that deed. Based on the fact that the deed had been signed, the court found it to be valid and the joint tenancy severed, meaning the estate and Elliot’s husband were tenants in common and therefore each entitled to 50 per cent of the net sale proceeds.9 This is because the intention and validity of an instrument as between the parties is determined on the date of execution rather than the date of registration.10 Elliott had intended to sever the joint tenancy prior to her death, as evidenced by meeting privately with a lawyer in the hospital and signing the required documents. She intended for her children to inherit her 50 per cent interest in the house. It was therefore irrelevant that the deed was not registered, which only occurred due to her lawyer’s error.

The court then turned to the post-mortem registration of the deed by the lawyer. The court separately found that zombie deeds are highly problematic because they can produce registrations based on false and inaccurate law statements. In this case, the instrument contained statements that Elliott was over 18 years of age and a spouse – both of which were false since she was deceased at the time of registration.11 According to the court, a lawyer who finds themselves in this situation should instead bring an application requesting a certificate of pending litigation and a declaration of an interest in land and a vesting order under section 100 of the Courts of Justice Act.12 The court also clearly stated,

“Zombie” deeds/transfers, Winarski transfers” or “zombie” Acknowledgements and Directions to transfer land, are invalid and properly rejected for registration by the Land Registry Office and risk de-registration as the transferor(s) are deceased.13

Lem took the opportunity to praise the Thompson analysis and announce that a lawyer cannot, under any circumstances, register a signed deed by a deceased owner due to the fact that by doing so, they are guilty of making a false law statement.14

The result?

The dismissal of zombie deeds in Thompson turned on the fact that the premise of the Land Titles system is that what shown in the system reflects the true state of title, and zombie deeds produce registrations based on false and inaccurate law statements. Further, Lem has clearly provided that zombie deeds are not to be registered. However, despite the court ruling and the seemingly unequivocal statement from the director of titles, the legal community is divided on the issue – it likely will take a ruling from the Court of Appeal to finally lay this issue to rest. 

Rachael Belford is a real estate lawyer at Perley-Robertson, Hill & McDougall LLP. Belford focuses on residential and commercial real estate, working with buyers, sellers, lenders, landlords, tenants and investors in various real estate transactions. She also assists clients with the preparation of wills, powers of attorney, and guardianship applications.

1 Bob Aaron, “Can Property Deed Be Registered After Death to Avoid Probate Fee?” (13 December 2017), online: Robert R Hof < https://roberthof.ca/can-property-deed-be-registered-after-death-to-avoid-probate-fee/>.

2 Don Travers, “What is a Zombie Deed/Transfer?” (26 January 2018), online: Travers Tidbits <http://www.traverstidbits.com/2018/01/26/what-is-a-zombie-deed-transfer/>

3 Jefferey Lem, “Zombie Deeds are Dead!” (28 May 2020), online: A Lot from the DOT <https://www.teraview.ca/wp-content/uploads/2020/05/A-LOT-FROM-THE-DOT-ZOMBIE-DEEDS.pdf>.

4 2015 ONSC 812

5 Ibid.

6 James Cook, “Zombie Deed Sparks Reoccurring Legal Debate” (20 March 2020), online: Mondaq < https://www.mondaq.com/canada/Family-and-Matrimonial/905350/Zombie-Deed-Sparks-Reoccurring-Legal-Debate>.

7 Aaron, supra note 1.

8 2020 ONSC 1004.

9 Ibid at para 7.

10 Ibid at paras 51, 84.

11 Ibid at para 37.

12 Ibid at para 11.

13 Ibid at para 13.

14 Lem, supra note 3.