One strategy that lenders use to recover money you owe them is placing a lien on your home. This document gives them a legal claim on your property, meaning you can’t sell it without paying off the debt first. Liens arising from past-due debts can be financially devasting for your household. They remain on your credit report for many years, which can negatively affect your ability to obtain new loans or refinance your mortgage. In some situations, the lien also allows your lender to force the sale of your property to collect the money owed. In this guide, we’ll explain the steps for removing the lien on your home in Ontario. We’ll also show you preventive measures to take if you’ve fallen behind on your debt payments and fear a lien is looming.
Step 1: Understand what kind of lien you have
Some liens are more challenging to handle than others, so fully understanding the type of lien you’re dealing with should be your first priority. As a result, you can determine the best and fastest way to remove it. You’ll also be better prepared to counter pushback from your creditor, primarily if they applied the lien in bad faith.
Here are some of the most common types of liens you’re likely to encounter:
- Construction liens. Have you had any renovation work done on your home? If so, the construction firm can issue a lien on your property, including the land.
- Bank liens. Banks and other financial institutions can register a lien on your home for various unpaid debts. These can include personal loans, auto loans, and lines of credit, but only if they have obtained a court judgement.
- Tax liens. Governments can place liens on your home if you fail to pay your taxes on time. The most obvious example is the Canada Revenue Agency (CRA), which can also force you to sell your home. Your municipal government can do the same if you don’t pay your property taxes.
- Condo liens. If you own a condo, paying condo fees is a non-negotiable monthly expense. Failing to do so can result in the condominium corporation issuing a lien on your unit. The same applies if you owe money for fines and special assessments.
- Notice of security interest (NOSI). Have you had a supplier install leased equipment in your home, such as a furnace, water heater, or security system? If so, failing to pay the monthly fee may lead to the supplier issuing a lien on your property called a Notice of Security Interest (NOSI). While previously allowed, NOSIs for consumer goods are illegal in Ontario as of June 6, 2024.
- Judgement liens. An individual or business to whom you owe money but have not paid can obtain a court order called a Writ of Execution. This document gives them the legal right to seize your real estate, courtesy of a local sheriff.
Step 2: Find out more details about your lien
The next step is to learn more about your lien, so you must obtain a copy of the relevant documents.
Sometimes, you’ll receive the paperwork directly, primarily if your lien stems from a lawsuit. In other cases, you’ll need to contact the individual, company, or organization that registered the lien and ask them to forward the documents. However, this option isn’t always feasible or can take too much time.
Another solution is to track down the documents by searching online at Ontario’s Onland web portal, which holds records of land and property ownership in the province. The document you need to find is a “Parcel Register,” which contains your home’s description, transfer history, and all liens registered against your property. You’ll need to pay a small fee to access the parcel register service.
Once you locate your home in the parcel register, the lien should appear under the column “Instrument Type,” as Pro Bono Ontario explains on their website. Take note of the lien registration number in the far left-hand column, which you’ll need to get the rest of the details.
From here, perform another search through the Onland site. But instead of accessing the parcel register, search by “Document” using the lien registration number as a reference. You’ll discover who placed the lien on your home and when, plus other relevant information.
Make sure to purchase a certified copy of each document throughout this process—it will come in handy if you need to dispute your lien in court.
Besides the Onland web portal, you can also search through Teranet Express, a private company that offers similar services. Alternatively, you can visit your local Land Register Office. The staff can help you obtain copies of all the relevant documents.
Step 3: Choose the optimal strategy for removing the lien
In general, you have three strategies for removing a lien from your home: pay what you owe, negotiate with the lien holder, or dispute the lien in court.
Option #1: Pay off the debt
The most straightforward way to disappear a lien is by paying the total amount owed. Depending on your financial situation, acquiring the funds needed may involve borrowing money. Unfortunately, this may result in you sinking further into debt. But if you can obtain a low-interest loan, it’s worth entertaining. If your outstanding balance isn’t too large, lowering your spending or selling unwanted items you own can help you collect the money faster.
Option #2: Negotiate with your creditor
If paying the entire balance isn’t realistic, ask your creditor if you can pay a reduced amount in exchange for having the lien withdrawn. While your success in getting relief hinges on your negotiating skills, the type of lien you have and who registered it are more significant factors.
Some creditors are more willing to negotiate a debt settlement than others. For example, the CRA won’t accept anything less than 100% of the principal. Conversely, a credit card company may be willing to forgive a portion of your debt.
Consider hiring an attorney or paralegal if you’re uncomfortable bargaining.
Option #3: Dispute the lien
If you believe the lien is illegal or misapplied, you can dispute it in court or through arbitration. The advantage of this method is that the decision made by the judge or arbitrator is legally binding and enforceable. If you successfully prove your case, your creditor must comply and remove the lien. Be sure to hire a real estate lawyer for assistance if required.
Here are some examples of an unlawful lien:
- The lien is a Notice of Security Interest (NOSI). Liens for consumer goods in your home, such as water or furnace, are illegal in Ontario.
- The creditor failed to register the lien on time. For example, a general contractor has 60 days to apply a construction lien on your property in the province.
- The lien has expired. Some liens have expiration dates, after which they’re no longer enforceable. In Ontario, construction liens remain in effect only for 90 days after the work is complete. During this period, the lienholder must start legal action to recover the money. Once the deadline expires, they lose the right to do so.
You can sue your creditor in the Ontario Small Claims Court if the disputed amount is $35,000 or less. If you prefer to avoid a formal trial, which can be tedious and costly, consider enlisting an arbitrator instead. Arbitration is often a faster and cheaper way to get rid of a wrongful lien than going to court.
Besides the court and arbitration, there may be other organizations that can help you dispute a lien. For example, suppose you’re dealing with a construction lien. In that case, you can apply for a legally binding decision with the Ontario Dispute Adjudication for Construction Contracts authority (ADACC).
Bankruptcy and consumer proposal: solutions that stops liens before they can begin
Filing a consumer proposal or bankruptcy will prevent unsecured lenders from taking legal action against you to collect unpaid debts. The court grants you this protection through an order called a stay of proceedings. All unsecured lenders will lose the ability to do things like garnishing your wages, freezing your bank account, and placing a lien on your home.
Keep in mind that existing liens attached to your house before your filing date will remain in place during the insolvency period. However, under a consumer proposal, you can negotiate with your unsecured creditors to pay less than what you owe. Alternatively, bankruptcy will allow you to eliminate all unsecured debts, including unpaid taxes.
Regardless of your choice, bankruptcy and a consumer proposal will free up your cash flow. With more money in your pocket, you’ll quickly pay off your debt, leading to that pesky lien going away. Being more cash-rich will also help you avoid threats of future liens on your property as well.
How long does removing a lien from a property in Ontario take?
Once you pay your creditor what you owe, they’ll remove the lien from your home. The time it takes depends on how organized your creditor is and the type of lien involved. The entire process can take several weeks, sometimes over a month.
Typically, your creditor will send you written confirmation of your payment within a few days of receiving it. Then, they will prepare a lien release and send it to the land registry office. The land registry staff will administer the release, permanently removing it from your home.
The bottom line on removing a lien from your house in Ontario
Removing a lien can be tricky, if not impossible, unless you pay the amount owed to your creditor, either in whole or through a debt settlement. Therefore, be proactive and take steps to deal with unpaid debts swiftly. The longer you wait, the more inclined your lender may be to register a lien on your home or other assets.
Contact David Sklar & Associates today to learn how to get financial relief and stay clear of liens and other threats from creditors forever. As Licensed Insolvency Trustees in Ontario, we can help guide you out of debt and toward a brighter financial future.
