In Ontario’s real estate landscape, few legal instruments carry the disruptive force of a Certificate of Pending Litigation (CPL). Registered directly on title, a CPL publicly declares that someone has commenced a court proceeding in which an interest in the land is claimed. It is a legal cloud that follows the property wherever it goes. In Toronto’s high-stakes development market, that cloud can bring an entire project to a standstill.
Unlike a construction lien, which secures payment obligations owed to contractors and suppliers, a CPL is rooted in substantive property claims: disputes over ownership, beneficial interest, specific performance of purchase agreements, resulting trusts, or alleged fraudulent conveyances. The moment a CPL appears on title, every subsequent dealing with the property, such as refinancing, new mortgage registration, and drawdown requests under construction loan facilities, becomes legally precarious. Lenders, title insurers, and institutional investors respond with extreme caution, and often an outright refusal to proceed.
A CPL does not determine the outcome of the underlying lawsuit. It simply advertises that a claim exists. But that advertisement alone is sufficient to paralyze an otherwise healthy development project.
Construction financing in Ontario typically operates through a phased drawdown structure, with advances released in portions as construction milestones are reached. This structure depends entirely on clean title at every drawdown. When a CPL appears on title, the entire mechanism breaks down.
Most institutional construction loan agreements contain express title warranty covenants and material adverse change clauses. A registered CPL triggers both. The lender’s solicitor cannot provide a clean title opinion in the face of a registered CPL. Without that certification, the advance does not happen. A developer mid-construction may suddenly find themselves unable to access committed funds, with trades on-site, materials ordered, and draw requests stacking up. Subcontractors go unpaid, construction liens accumulate, timelines collapse, and the developer’s lender relationship deteriorates rapidly.
In Toronto’s commercial real estate market, where construction loans routinely run into the tens or hundreds of millions of dollars, even a brief financing interruption can trigger a cascade of contractual defaults. Lenders may invoke standstill provisions or move to enforce security. This is why a CPL on a development property is never a procedural inconvenience; it is an existential threat to the project.
The impact of a CPL extends beyond construction lending into the broader mortgage approval ecosystem. Whether the financing sought is a new first mortgage, a refinancing, or a vendor take-back arrangement, the presence of a CPL is universally disqualifying to conventional lenders. Mortgage underwriting guidelines across virtually every institutional lender in Canada require title to be free of adverse claims capable of impairing the lender’s security, and a CPL squarely falls within that category.
There is a common misconception that title insurance operates as a panacea for title defects. In fact, title insurers will not insure over an unresolved CPL. Since a registered CPL is a known encumbrance appearing on a title search, insurers will virtually never accept the risk, and no lender can close without the title insurance policy it requires. The result is an interlocking chain of obstruction: the litigation blocks the title insurance, which blocks the mortgage, which blocks the financing, which blocks the project.
Limited relief mechanisms are available. An order discharging the CPL may be obtained on motion where the court is satisfied that the underlying claim lacks merit, that the balance of convenience favours discharge, or that adequate alternative security can be provided. In appropriate cases, the court may order the CPL discharged upon payment of funds into court or delivery of an irrevocable letter of credit.
Not all Certificates of Pending Litigation are created equal. While the threshold for obtaining leave to register a CPL is relatively low (a party needs only to demonstrate a triable issue as to their claimed interest), the justification required to maintain one through contested litigation is considerably more demanding. Developers facing a strategically registered CPL, deployed not as a genuine assertion of property rights but as a tactical instrument to extract concessions or manufacture leverage, have strong recourse under Ontario law.
Where a CPL has been obtained without reasonable grounds, or maintained after the underlying claim has been shown to be without merit, the wrongly encumbered party may pursue an action in abuse of process or seek substantial indemnity costs. Ontario courts have characterized the misuse of CPLs in commercial real estate as a serious abuse of process and have awarded meaningful sanctions against litigants who deploy these instruments as weapons rather than legitimate protections.
The strategic response to an unjustified CPL must begin the moment the encumbrance appears on title. Speed is essential; every day the CPL remains, the financing clock runs against the project. Engaging experienced commercial real estate litigation counsel at the earliest possible stage is, in most cases, the difference between a project that survives and one that does not.
Several practical lessons apply to anyone operating in Toronto’s commercial real estate market.
Rigorous title searches at every stage of a development project, not merely at initial acquisition, but at each financing milestone, are an essential safeguard. Unexpected encumbrances can arise from litigation involving related entities, predecessor titles, or disputed ownership chains that were not apparent at the outset.
Every construction loan agreement should contain carefully drafted provisions governing title disputes, including obligations requiring prompt notice to the lender upon appearance of a CPL, requirements to contest CPLs diligently, and rights permitting the lender to take defensive action if the borrower fails to act. These provisions do not eliminate disruption but establish a clear contractual framework for responding to it.
The economic harm caused by a CPL in a construction financing context compounds with every day the encumbrance remains on title. Draws that cannot be made, interest that continues to accrue, contractor relationships that deteriorate, and project timelines that erode do not pause while underlying litigation takes its course.
If a Certificate of Pending Litigation has appeared on title to your property, or if you are a lender dealing with a borrower whose development site has been encumbered, the time to act is now. At Milosevic & Associates, our Toronto commercial real estate litigation lawyers have extensive experience obtaining urgent orders to discharge CPLs from development properties across the GTA and throughout Ontario. We act for developers, institutional lenders, mortgage investment corporations, joint venture partners, and investors facing CPL-related financing disruptions at all scales.
Whether your matter involves a wrongful CPL, a lender’s priority dispute, a construction lien overlap, or a complex ownership claim threatening your development financing, we are ready to move immediately. Contact us online or call (416) 916-1387 to schedule a confidential consultation.
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