Have you been threatened with placement of a lien on your property? When you are struggling with bills and debts you cannot afford to repay, threats of a lien on your home are likely the last thing you need. It is important to understand what a lien on property actually means – it is a legal claim that a creditor has against your home if you do not pay what was agreed. If you have a mortgage in place, you will automatically have a lien on your property. Liens are commonly used by banks and financial institutions to ensure they reclaim they money that they are owed. In this article, we share what a lien on property actually means, and what to do if you find yourself with one placed on your property or if you are being threatened with one.
What is a lien on property and how does it work?
In order to understand what a lien on property is, you first need to understand how a loan works. A loan provides funds to an individual via an agreement that states that the borrower must repay their debt. Some loans allow borrowers to take on larger sums of money or lower interest rates by taking out a loan secured by a lien on property, like a car or a house. This lien allows the lender to access the property (car or home) if the borrower does not repay their loan as originally agreed. Liens on property are the most common type of lien, especially as a mortgage. The lien against your home enables you to access a large sum of money via a mortgage, which lets you buy such a costly asset. If you are able to stay current on your loan payments, your lien will be removed. If you default, creditors can pursue legal action and in the worst case scenario, your house could be seized.
What are the different types of liens on property?
You may not know that in Canada there are actually a few different types of property liens that can be placed against your home. These include mortgage liens, mechanics liens, and general judgment liens. Some liens can be useful to borrowers in allowing them to take on a loan for a large asset like a mortgage. Others are liens placed on your assets because of unpaid debts. Learn more about who can place a lien on property.
If you have unpaid tax debt, the CRA can place a lien on your home and any other assets you may have to try and reclaim their money. They can place a lien on your property without your permission, but you will receive a notice beforehand to inform you that a certificate of arrears has been registered. If you continue to avoid paying the debt that you owe, your property could then be used in order to recover the funds. When you eventually pay the outstanding debt, the lien can be removed.
A mechanics lien is registered against a property when completed labour is not paid for. If, for instance, you have plastering done, but fail to pay the plastering company, they could place a lien on your home. The company will try to collect the money from you first, but if they still do not receive their funds they could place a lien on your property and pursue you in court. Of course, if you repay what is owed, your lien will be released. In order to avoid this scenario, you should make sure all subcontractors have been paid when a job is completed.
General judgement liens
A general judgement can come about when a lender has taken you to court over repayments that you owe. If the court rules in their favour, a general judgement lien may be placed. If you cannot repay the lender, the general judgement lien can be used to collect the unpaid amounts. If, on the other hand, it is repaid, the lien can be released.
How do you stop a lien on your property in Canada?
Liens on property can cause a number of different problems – they can even stop you from selling your home in some scenarios, and can cause no end of stress and disagreement. If a lien on property is something you are keen to avoid, prevention is best. If you are struggling with your debts and begin to become aware that you will not be able to make your repayments, you should speak to a reputable Licensed Insolvency Trustee. As the only professionals in Canada legally able to file all forms of debt relief, Licensed Insolvency Trustees are well positioned to review your financial circumstances and advise on the best plan to debt relief for you. Navigating creditors and the prospect of a lien on your home can be risky, and so a professional who can assess your finances and support you is often the best way forward. When it comes to the CRA, its powers are unrivalled in taking action to collect its unpaid debts. It may be that filing a consumer proposal to reduce your unsecured debt by up to 80% could free you up to make your necessary bills and remove the threat of a lien on your property. For others, bankruptcy may be more appropriate as a way of beginning a fresh financial future. At Spergel, our Licensed Insolvency Trustees may be able to stop liens on property through negotiations on your behalf. We have helped over 100,000 Canadians gain debt relief and peace of mind. Of course, the easiest way to stop a lien on your property in Canada is to pay the amount owed, but we know the situation is not always so straightforward.
How do you release a lien on property?
The simplest way to have a lien on your property released is simply to repay your loan, or to meet the terms of the loan agreement. If, for instance, you pay off your mortgage, the lien will be released on your home. In Canada, any lien on your property will be registered with the Land Registry of your province, and will therefore show up in title searches. This can affect your ability to borrow credit – if you apply for a loan using your property, any liens associated with it will show up. When purchasing a property, you should check that it is clear of any liens that may have been placed from the previous homeowner.
More questions about lien on property? Book a free consultation with a reputable Licensed Insolvency Trustee at Spergel. We can assess your financial circumstances and help you to prevent a lien being placed on your property, or prevent further action if you are facing threats. We have been helping Canadians clear their debts and begin a fresh financial future for over thirty years, and we are here to help you too.