Zombie Deeds – the Undead of the Real Estate World

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 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. While the Ontario Superior Court seemed to accept the use of zombie deeds in Winarski v Sproul in 2015, a more recent case by the same court rejected them as invalid, and the legal community remains divided.

Hope for Zombie Deeds – Winarski v Sproul

In Winarski v Sproul, Ann Sproul and her son James each owned a portion of a house.[3] 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.[4] This decision did not, however, address the consequences of unregistered deeds on the Land Titles Act registry system which is based on the principle that what is shown in the registry reflects the true state of title.[5]

Following this case, Ontario’s Director of Titles, Jeffrey Lem, said zombie deeds are no longer eligible for registration and will be rejected by the land registry office if discovered.[6] This statement left many wondering whether Winarski was still considered good law.

Death of the Zombie Deed – Thompson v Elliott Estate

A recent Ontario Superior Court case provided a contrary conclusion. Thompson v Elliott Estate involved a zombie deed registered on behalf of Ms. Elliott shortly after her death, for the purposes of severing joint tenancy with her husband.[7] Her husband, Mr. Thompson, sought a declaration that he held a 100% 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% of the net sale proceeds as a tenant in common or whether Mr. Thompson was entitled to 100% of those proceeds.

The Court found that the estate and Mr. Thompson were each entitled to 50% of the net sale proceeds.[8] Joint tenancy takes effect on delivery of a deed, not upon actual registration. Therefore, the deed was valid on the date of execution.[9] Ms. 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% interest in the house. The Court stated that it was through her lawyers’ error that the transfer was not immediately registered.[10]

However, the Court’s ruling didn’t mean that zombie deeds are valid. It 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 Ms. Elliott was over 18 years of age and a spouse – both of which were false statements since she was deceased at the time of registration.[11]

A lawyer who finds themselves in these circumstances should bring an application requesting a certificate of pending litigation and a declaration of an interest in land and for 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]

Once again, Jeffrey Lem took the opportunity to announce that you cannot, under any circumstances, register a signed deed by a deceased owner, even if  you are “pretty sure that is what the client would have wanted…TAKEAWAY: Zombie Deeds are improper. Period.”[14]

Despite this seemingly unequivocal statement from the Director of Titles, the legal community is split on the issue – perhaps it will take a ruling from the Court of Appeal to finally lay this issue to rest.

[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] 2015 ONSC 812.

[4] Ibid.

[5] 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>.

[6] Aaron, supra note 1.

[7] 2020 ONSC 1004.

[8] Ibid at para 7.

[9] Ibid at paras 51, 84.

[10] Ibid at para 9.

[11] Ibid at para 37.

[12] Ibid at para 11.

[13] Ibid at para 13.

[14] 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>.