In times of financial uncertainty, the last thing you need is the threat of a lien on your property. This article aims to shed light on the mechanics behind a lien on property, its implications and the preventive measures you can take.
What Exactly is a Lien on Property?
A lien on property is essentially a legal claim by a creditor against your property to secure repayment of a debt. If you’ve taken out a mortgage, then a lien has been placed on your property by default. The core idea is to protect the interests of banks and financial institutions in reclaiming the money they’ve lent.
The Workings of a Lien on Property
To understand how a lien works, you need to comprehend the dynamics of a loan. A loan agreement stipulates that the borrower will repay the debt. In some cases, the loan is secured by a lien on property, like a house or a car. This lien enables the lender to lay claim to specified property if the borrower fails to fulfill their repayment obligations.
Property liens, particularly mortgage liens, are the most common types. They allow you access to large amounts of money to purchase high-valued assets like a house. If you keep up with your loan repayments, the lien is removed. However, if you default on your payments, creditors can resort to legal action, and worst-case scenario, seize your property.
Different Types of Liens on Property in Canada
In Canada, various types of liens can be placed on your property. These include mortgage liens, mechanics liens, and general judgment liens. Some of these liens can be beneficial for borrowers, while others are a consequence of unpaid debts.
Mortgage Liens
Mortgage liens are placed by the CRA to recover unpaid tax debt. This lien can be placed without your consent, although you will be notified beforehand. If you fail to repay your debt, your property can be seized to recover the funds. Upon repayment of your debt, the lien is removed.
Mechanics Liens
Mechanics liens are registered against a property when labor costs are not paid. For example, if you fail to pay for plastering done on your property, the company can place a lien on your home. If you settle your dues, the lien is released.
General Judgement Liens
A general judgment lien can be placed on your property if a lender sues you over unpaid debts and the court rules in their favor. If you are unable to repay the lender, the lien can be used to recover the unpaid amounts. Conversely, if the debt is settled, the lien is released.
How to Prevent a Lien on Your Property in Canada?
Property liens can cause a variety of problems, including preventing you from selling your home. The best way to avoid a lien on your property is by taking preventive measures. If you’re struggling with debts, consult a Licensed Insolvency Trustee. These professionals are equipped to review your financial situation and advise you on the best course of action to achieve debt relief.
When dealing with the CRA, it’s crucial to understand their extensive powers in collecting unpaid debts. Filing a consumer proposal to reduce your unsecured debt by up to 80% might be a feasible solution. For some, declaring bankruptcy might be a more suitable option to start afresh financially.
How to Release a Lien on Property?
The most straightforward way to release a lien on your property is to repay your loan or meet the terms of the loan agreement. If you’ve paid off your mortgage, the lien on your home will be released. Any lien on your property will be registered with the Land Registry of your province and will show up in title searches. This may affect your ability to borrow credit.
When buying a property, ensure it’s free from any liens placed by previous owners.
Dealing with Liens on Property
If you’re dealing with a lien on your property or facing threats of one, consider booking a free consultation with a reputable Licensed Insolvency Trustee. They can assess your financial circumstances and help you prevent a lien from being placed on your property or stop further action if you’re already facing threats.
Remember, the simplest way to avoid a lien on your property in Canada is to repay the amount owed. However, we understand that situations may not always be straightforward.
In conclusion, understanding the implications of a lien on your property is vital to managing your financial health. By understanding the different types of liens and taking preventive measures, you can safeguard your property and achieve financial stability.
