What are zombie deeds, and are they valid?
In a recent case brought to the Ontario Supreme Court, a woman transferred her house to her children, to sever the joint tenancy with her husband. The transfer, however, took place three days after her death. This is referred to as a “zombie deed”. In legal terms, a zombie deed is a transfer of an interest in land or property that was signed in the grantor’s lifetime but not registered until after the death of the grantor, as if they were still alive.
Zombie deeds have caused some controversy in recent cases, as they have been used as an estate planning tool to avoid paying certain taxes and even to hide or avoid the disclosure of property transfers from a party. This controversy leads to the question: if a deed or transfer is signed by someone before their death, but registered after, is the registration valid and legally enforceable?
In a recent case from Ontario (Thompson v. Elliott Estate 2020 ONSC 18220), Ms. Elliott signed a transfer however she suddenly passed away before her lawyer was able to register it in the Land Title Office. After being informed of Ms. Elliott’s passing, the lawyer proceeded to file the transfer. This meant that the required law statements on behalf of Ms. Elliott regarding her age and spousal status when making the transfer were false.
The court found that the lawyer had erred in registering the zombie deed and held that zombie deeds to transfer land are invalid. The court further stated that if detected, zombie deeds will be properly rejected by the Land Registry Office and risk de-registration.
However, the court also noted that the transfer signed by Ms. Elliott was done so with the intention that it would be immediately registered. The court stated that there was enough evidence of a clear intention by Ms. Elliott to sever the joint tenancy and that there was enough evidence of sufficient instructions to register and transfer the land. The court found that although the lawyer erred in registering the transfer, legal delivery had occurred and the severance of joint tenancy was legally effective.
In 2015, the BC Supreme Court in Plecas v. Plecas upheld the use of a zombie deed as an estate planning tool. In that case, Ms. Plecas owned farming property that she wished to transfer to her son. However, she instructed her lawyer to wait to register the transfer until after her death to avoid the probate tax implications and fees that result from immediate registration. The plaintiff in the case, Ms. Plecas’ grandson, brought an action seeking to have the transfer overturned; citing the transfer was incomplete and that Ms. Plecas had never relinquished control of the properties. He also submitted that since the transfer was not registered until after Ms. Plecas’ passing, she could have changed her mind and cancelled the transfer any time prior to her death.
The defendant, Ms. Plecas’ son, submitted that Ms. Plecas had a clear intention to transfer the property to him and that the transfers signed in 2008 were effective starting from that date.
The court upheld the transfers and found that they were effective against Mrs. Plecas upon execution and thus the executed transfers carried the right to apply for registration, even after Ms. Plecas’ death.
The Court in Plecas relied on s. 20 of the Land Title Act which provides:
20 (1) Except as against the person making it, an instrument purporting to transfer, charge, deal with or affect land or an estate or interest in land does not operate to pass an estate or interest, either at law or in equity, in the land unless the instrument is registered in compliance with this Act.
(2) An instrument referred to in subsection (1) confers on every person benefited by it and on every person claiming through or under the person benefited, whether by descent, purchase or otherwise, the right
(a) to apply to have the instrument registered, and
(b) in proceedings incidental or auxiliary to registration, to use the names of all parties to the instrument, whether or not a party has since died or become legally incapacitated.
While zombie deeds have been upheld in British Columbia, using them comes with certain risks. If challenged, the transferee must be able to show that the document was legally delivered and the transferor intended to transfer title to the property to the transferee.