You may have heard about the ability of creditors, construction companies, and even the CRA to put a lien on your house in Ontario. But what exactly does it mean to “put a lien on a home,” and what are the consequences, if any, to be aware of?
A lien is a legal mechanism that individuals, businesses, and governments can use to enforce the payment of a loan or other contract where you owe money. In this article, we’ll explain how it works, who can file one, its impact on your home, and your options for dealing with it.
What does a lien on your home mean?
A lien is a legal claim on an asset to satisfy an unpaid debt. In other words, if you owe money to someone and fail to repay it, they can file a lien against your home and other property you own. That means they have a right to keep possession of it until you pay your debt in full. A lien also gives them the right to seize and sell your home to cover the outstanding debt.
Sometimes, a lien on your house exists because you voluntarily consented to it in return for accessing a loan. The most notable example of a consensual lien is a mortgage, where you agree to put your home up as collateral to receive financing. Until you pay your mortgage in full, your lender can legally foreclose on your property should you default on your payment obligations.
The same concept applies to a home equity line of credit (HELOC) and home equity loan. Both are a form of secured debt where your home functions as collateral that your lender can seize if you default on the loan.
Aside from your mortgage lender, many other individuals and organizations can register a lien against your home, which we’ll cover below.
Who can put a lien on your home in Ontario?
Various private individuals, businesses, and government organizations like the Canada Revenue Agency (CRA) can place a lien on your home in Ontario. Here are some common examples.
Lending institutions. Banks and other financial institutions in Ontario can put a line on your home for outstanding debts owed. They can file a lien if you have defaulted on the loan and if they have obtained a court judgement or order . Creditors in other parts of Canada also possess the right to file a lien to enforce an unpaid debt with a court judgement.
Construction companies and suppliers. Ontario has a law known as the Construction Act, which allows anyone who supplies materials and other services toward the construction or renovation of a building to put a lien on the property (including the land). Some examples are general contractors, subcontractors, labourers, and suppliers. If you or the general contractor don’t compensate them for their work, they can obtain court approval to register a lien on your home.
A contractor has 45 days to file a lien on your property following the day the contract falls through or the issuance of the Certificate of Substantial Performance is issued, whichever comes first. The same rules apply to subcontractors and suppliers.
A lien initiated by professionals in the construction industry is sometimes called a builder’s lien.
Rented or leased equipment suppliers. A lien that homeowners sometimes overlook is a Notice of Security Interest (NOSI). A creditor can file this lien to notify other creditors (namely the mortgage lender) that they have a higher-priority claim over a specific item inside your home. Some examples are a furnace, air conditioning unit, water heater, and security system. These liens are regulated under the Personal Property Security Act (PPSA).
Suppose you permit a business to install one of the above fixtures in your home, as part of a long-term lease contract. In that case, they may register a lien on your property title. Sometimes, they may do it without your knowledge or consent. If that’s the case, you may not know about the NOSI lien unless you decide to sell your home; you or the buyer will discover it when doing a title search.
Condo corporation. If you own a condo and have past-due condo fees, fines, or special levies, the condo corporation can place a lien on your unit.
Municipal government. If you don’t pay your property taxes in Ontario in the last two years, the municipality you live in can place a tax lien on your home. In extreme cases, they may enforce the lien by forcing a sale of your property.
Can an unsecured creditor like a credit card company file a lien on your home?
There’s no disputing a mortgage lender has a lien on your home, but what about unsecured lenders like credit card companies?
When you open a credit card account, there’s no requirement to pledge an asset, including your personal residence, as collateral to secure the money you borrow. That means the credit card issuer cannot legally assume ownership of your house if you default.
However, an unsecured creditor can still register a lien on your home, even though you never put it up as collateral in the first place. If you fail to keep up with your payments, they may decide to seek a legal judgment from the court (they will likely go through the small claims court to file a lien if the outstanding amount is $25,000 or less). Once received, they have a legal claim to the money through the lien on your property.
Can the Canada Revenue Agency (CRA) file a lien on your home?
Absolutely. The CRA possesses vast collection power for unpaid taxes, one of which is attaching a lien on your assets, including your house.
The CRA may not notify you of the impending lien and can take action to register it very quickly. Sometimes, you may only find out about it once you try to sell your home when it appears during a title search. However, they’ll usually attempt to collect the tax debt through other methods before pursuing a tax lien. In addition to written and verbal warnings, they may freeze your bank account or garnish your wages.
Like other creditors, the CRA reserves the right to seize your home outright to cover the unpaid tax debt. However, they may also wait until you sell it to recover the money owed. Should the latter occur, your CRA tax debt will automatically be deducted from the sales proceeds, after which you’ll receive whatever is left.
Can you sell your home if there’s a lien on it?
Unfortunately, if your home has a lien attached to it, you won’t be able to sell it until you’ve settled the lien with your creditor. Legally, you cannot complete the sales transaction with a lien intact, so you’ll need to work out a payment arrangement with them. Once you’ve paid off the debt, they’ll remove the lien, and you can proceed with the sale.
However, this rule isn’t absolute – it may still be possible to sell your home while one or more liens are attached to its title. For example, suppose the buyer will pay off your lien upon closing the sale. In that case, the lienholder may allow the transaction to proceed. However, finding such a buyer could be challenging, as most will not wish to assume financial responsibility for your unpaid debt.
You can also negotiate a debt payment agreement with your lienholder to complete the sale of your home. For example, you can offer to settle your balance using the proceeds from the sale. However, this is far easier said than done. If you’ve already defaulted, they’ll have little confidence in your ability to pay, especially if your home lacks sufficient equity.
How to find out whether there’s a lien against your home in Ontario?
Sometimes, you’ll receive notification of a lien placed on your home, primarily if it originates from a court case. However, some individuals or organizations registering a lien may skip the court to save time. In such a scenario, you likely will only find out about it if you decide to sell your home. There’s no legal obligation for someone to inform you that they’ve filed a lien against your home in Ontario or elsewhere in Canada.[MM1]
If you’re curious about whether there’s a lien on your home, there are registries available where you can search. A great place to start is the OnLand web portal, which provides access to Ontario’s Land Registry for a small fee.
How long does a lien stay on your home?
A construction lien remains valid for 90 days from the registration date. During this period, the lienholder can initiate legal action, using the lien to recover the money they owe. But should they fail to do so and the 90-day period ends, the lien expires and is rendered worthless (though they still have the right to pursue other lawsuits against you).
Other property liens, such as those imposed by the CRA or a bank, can stay on your home’s title indefinitely until you pay off your debt to the lienholder.
How to deal with a lien that a creditor has filed on your property
Unless you can prove that the other party obtained it unlawfully, there’s no easy way to have a lien removed from your home’s title. In most cases, the surest way to eliminate it is to arrange a debt settlement with the lienholder or pay off the entire balance in full.
Given the issues a lien can pose, it’s wise to be proactive and deal with past-due debts before a creditor registers one against your property. But what if you’re struggling to pay off one or more unsecured loans, like a credit card? In that case, you may want to consider enrolling in a debt relief program offered in Canada called a consumer proposal.
By filing a consumer proposal or bankruptcy, the court will grant you a stay of proceedings, preventing creditors from taking legal action against you, including placing a lien on your home.
Under a consumer proposal, you can also consolidate your unsecured debts (some of which may have spurred the lien in the first place) and negotiate a new payment plan with your creditors. You could reduce what you owe by up to 80%. Plus, a consumer proposal doesn’t require surrendering your home and other assets to creditors.
If you’re worried about a lien being placed on your home or already have one, contact a Licensed Insolvency Trustee (LIT) to review your financial situation and explore options to tackle your debts. An LIT is the only debt professional in Canada who can legally administer every form of debt relief on your behalf and give you a fresh start in rebuilding your financial future.
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