Buying a House with an HVAC Rental or NOSI: What Ontario Home Buyers Need to Know

What Is a NOSI and Why Should Buyers Care?

A Notice of Security Interest (NOSI) is a legal registration placed on a property's title in the Ontario Land Registry. HVAC rental and financing companies register NOSIs to protect their interest in equipment installed in the home. Think of it as the company saying: "We own the furnace/AC/water heater in this house, and that obligation follows the property." [1]

For home buyers, this matters because purchasing a home with a NOSI means you may be inheriting a long-term rental contract you did not sign. These contracts often run 10 to 15 years with monthly payments of $80 to $250, and the total cost over the contract's life frequently exceeds the equipment's actual value by two to four times.

The NOSI itself does not create the obligation. The rental contract does. But the NOSI is the mechanism that makes the obligation "follow the property" rather than staying with the original signer. When you buy a home with an active NOSI and rental contract, you are generally expected to continue the payments or buy out the contract.[3]

How to Check for NOSIs Before You Buy

Checking for NOSIs should be a standard part of your pre-purchase due diligence. There are two main search methods:

1. Title Search (OnLand / Teraview)

Your real estate lawyer will conduct a title search as part of the closing process. NOSIs registered against the property will appear on the title. However, do not wait until the last minute. Ask your lawyer to conduct the title search as soon as your offer is accepted, ideally during your conditional period.[1]

If you want to check before making an offer, you can search the Ontario Land Registry through the OnLand portal. Individual title searches cost approximately $30-$50. You will need the property's legal description or PIN (Property Identification Number), which your real estate agent can usually provide.

2. PPSA Search

A Personal Property Security Act (PPSA) search can reveal security interests registered against the property's occupant or the property address. This can catch registrations that might not appear on the standard land title search.[5]

Your lawyer can run both searches simultaneously. The cost is minimal (typically $20-$50 per search) and the information is invaluable.

3. Ask the Seller Directly

The Seller Property Information Statement (SPIS), while not mandatory in Ontario, asks sellers to disclose rental equipment. If the seller has completed an SPIS, review it for any mention of rented HVAC equipment. Even without an SPIS, your real estate agent should ask the listing agent directly whether any equipment in the home is rented or financed.[2]

Do not rely solely on the seller's disclosure. Some sellers genuinely forget about rental contracts they signed years ago. Others may not understand that the rental follows the property. Title and PPSA searches are your safety net.

Your Options When You Find a NOSI

Finding a NOSI on a property you want to buy is not necessarily a deal-breaker, but it does require action. Here are your main options:

Option 1: Require the Seller to Remove the NOSI Before Closing

This is the cleanest option. You include a condition in your offer stating that the seller must discharge all NOSIs and buy out all rental contracts before closing. The seller contacts the rental company, pays the buyout amount, and the NOSI is removed from title.

Buyout amounts vary widely. For a furnace or AC rental, the buyout might be $3,000 to $15,000 depending on the contract terms, remaining balance, and the company involved. Some companies charge penalties or "early termination fees" on top of the equipment balance.

From a negotiation standpoint, this is the strongest position for the buyer. You are asking the seller to deliver clear title, which is a reasonable and standard expectation in Ontario real estate transactions.

Option 2: Negotiate a Price Reduction

If the seller cannot or will not buy out the contract, you can negotiate a reduction in the purchase price equivalent to the buyout cost. You then handle the buyout yourself after closing.

This approach works well when the buyout amount is known and straightforward. Get the exact buyout figure in writing from the rental company before agreeing to a price reduction. Buyout amounts can change, and verbal quotes are not reliable.

One caution: if you plan to buy out the contract after closing, make sure your mortgage lender is comfortable with the NOSI remaining on title temporarily. Some lenders will not fund with an active NOSI.[6]

Option 3: Assume the Rental Contract

You can choose to take over the existing rental contract. This means you continue making the monthly payments under the original terms until the contract expires.

Before assuming a contract, carefully review the full agreement. Pay attention to:

• Monthly payment amount and any escalation clauses
• Remaining term (years left on the contract)
• Total remaining cost (monthly payment multiplied by remaining months)
• Equipment age and condition
• Maintenance and repair obligations
• End-of-term options (return, buyout, renew)

In most cases, assuming the contract is the worst financial option for the buyer. The total cost over the remaining term almost always exceeds what you would pay to buy equivalent equipment outright. However, if the contract has only a year or two remaining and the equipment is in good condition, assumption might make practical sense.

Option 4: Walk Away

If the seller refuses to address the NOSI and the numbers do not work for a price reduction, walking away is a legitimate option. A home purchase is a major financial commitment, and starting it with an inherited rental contract at above-market rates is not a strong position.

Impact on Mortgage Approval

NOSIs can create real problems with mortgage financing. Here is why:

When a lender provides a mortgage, they want to be in first position on title. A NOSI, depending on when it was registered, may have priority over the mortgage. This means if there were ever a default, the rental company's claim could take precedence over the mortgage lender's claim on the property.[6]

Different lenders handle NOSIs differently:

• Major banks: Most of the Big Five banks will require NOSI removal before funding, or at minimum need a postponement agreement from the rental company.
• Credit unions: Policies vary. Some are more flexible than the major banks.
• Alternative lenders: Generally more willing to work around NOSIs, but at higher interest rates.

Discuss any NOSIs with your mortgage broker or lender as early as possible. Finding out your lender will not fund three days before closing is a situation you want to avoid.

Your Real Estate Lawyer's Role

Your real estate lawyer is your most important ally when dealing with NOSIs. A competent real estate lawyer will:

• Conduct title and PPSA searches to identify any NOSIs or other encumbrances
• Explain the implications of any registrations found on title
• Draft appropriate conditions for your offer to purchase
• Negotiate with the rental company's legal team for discharge or postponement
• Verify that the NOSI has been properly discharged before closing
• Hold back funds from the purchase price to cover the buyout if the seller has agreed to remove the NOSI but has not done so before closing

Do not use the seller's lawyer or try to handle NOSI issues without independent legal counsel. The Law Society of Ontario recommends that buyers always retain their own lawyer for real estate transactions.

The 2024 NOSI Ban: What Changed and What Did Not

In 2024, the Ontario government banned the registration of new NOSIs for consumer goods including HVAC equipment. This was a response to years of consumer complaints about aggressive door-to-door HVAC rental sales and the burdensome nature of NOSIs on property transactions.[3]

What the ban does:

• Prevents rental companies from registering new NOSIs on consumer HVAC equipment
• Applies to contracts signed after the ban took effect
• Signals the government's recognition that NOSIs were being used to the detriment of consumers

What the ban does not do:

• It does not cancel existing rental contracts. The underlying contracts remain enforceable through other legal means (e.g., PPSA registration, court action, collection).
• It does not prevent HVAC rentals. Companies can still offer rental contracts; they just cannot register NOSIs to secure them.

For home buyers in 2026, this means you are less likely to encounter new NOSIs on recently purchased equipment, but you will still find legacy NOSIs on properties where HVAC equipment was rented before the ban. These legacy registrations must still be dealt with through the negotiation strategies described above.

Common NOSI Amounts by Equipment Type

To help you assess whether a price reduction or buyout makes financial sense, here are typical remaining balances and buyout costs for common HVAC rental contracts:

Notice that buyout amounts often exceed the cost of purchasing new equipment outright. This is one of the core criticisms of HVAC rental contracts and a key reason the Ontario government acted to ban new NOSI registrations.[3]

Checklist for Ontario Home Buyers

Use this checklist when buying a home in Ontario to protect yourself from NOSI surprises:

1. Ask the listing agent whether any HVAC equipment is rented or financed before making an offer.
2. Have your lawyer conduct title and PPSA searches during your conditional period.
3. If a NOSI is found, get the full rental contract and buyout amount in writing from the rental company.
4. Compare the buyout cost to the replacement cost of the equipment.
5. Decide your strategy: require removal, negotiate a price reduction, assume, or walk away.
6. Include the appropriate condition in your offer (your lawyer can draft this).
7. Inform your mortgage lender about the NOSI and confirm they will fund with it on title (or confirm removal before closing).
8. Before closing, verify the NOSI has been discharged from title if that was the agreed condition.

Frequently Asked Questions