What is a tax lien, and what do I do if one is registered against my home?

June 1, 2014

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When you owe money to Canada Revenue Agency (CRA), they (like all creditors) will try to collect that debt from you. If the debt is significant and you fail to repay it or negotiate acceptable terms, CRA has the right to place a lien on your home or other property (such as a cottage). This does not mean you will immediately lose that property, and there are steps you can take to have the lien removed.

How a tax lien works

A tax lien operates as any other lien. It is a legal claim against your property that will remain in place until you either pay the outstanding debt or the property is sold, with sale proceeds going first to pay off any outstanding mortgage, then to pay off the tax debt. Whatever money is left after paying those debts will go to you.

Can CRA take my house away from me?

Technically, yes. However, it is not CRA’s policy to leave anyone homeless, so if the property is your primary residence, you will have ample opportunity to find other payment sources. If significant time passes and you still don’t make payment arrangements, CRA may issue a Writ of Seizure and Sale, which is your final warning. If you continue to avoid paying your arrears, CRA may seize the property and you may be forced to leave.

In the case of a cottage or vacation home, CRA will most likely sell the property and use the proceeds to pay off your tax debt.

How can I know if CRA has registered a lien against my property?

CRA usually sends you a letter to tell you they’ve registered a certificate of arrears in Federal Court. This lets you know that they intend to place a lien against your property, at which time another letter will be sent. If CRA doesn’t have your mailing address, however, chances are you won’t know about a lien until you attempt to sell or refinance the property.

If you owe a significant amount of money to the CRA and you suspect they may have placed a lien against your home, you can do a title search at the Land Registry Office.

Can I still sell my home (or refinance it) if CRA has a lien against it?

Even if CRA has registered a lien against your home, you can still sell or refinance. After any outstanding mortgage debt is paid, however, CRA usually has next claim on the money from a sale or refinancing, and your secured tax arrears must be paid in full before any of the proceeds come to you.

What happens if I owe CRA more money than my property is worth?

If your property is sold and the proceeds aren’t enough to cover your CRA debt in full, you still owe them the remainder.

My spouse and I share joint title on our home, but I’m the only one with tax arrears. What now?

CRA can still place a lien against property you own jointly with someone else, but when that property is sold or refinanced, it can claim only against your share of the equity. If your spouse has no tax debt, his/her share cannot be touched by CRA.

Can’t I just file for bankruptcy?

Unfortunately, not even bankruptcy will remove a tax lien from your home. Even after you are discharged, the lien remains, and it will continue to accrue interest until the property is sold and the money used to pay down the tax debt.

So…I owe tax arrears and CRA has placed a lien against my home. How do I get it removed?

You have three options:

  • You can negotiate a payment plan directly with CRA. Once your tax arrears are paid in full, they will remove the lien.
  • You can sell your home and use the proceeds (after paying your first mortgage) to pay your CRA debt. Remember that, if the sale proceeds don’t pay the debt in full, you’re still responsible for the remainder owing.
  • You can file a consumer proposal. While this will not remove the lien immediately, a clause can be included in the proposal that says CRA will lift the lien when the proposal is complete. Of course, CRA must agree to the proposal in the first place—something that will depend on the amount of tax debt you owe and your proposal payment plan.

The bottom line is that tax arrears are serious. If you have unpaid taxes, whether or not you already have a CRA lien in place against your home, it’s important that you take immediate action to prevent additional problems. To find out what the best options are for your situation, call us today.

At Doyle Salewski, we can help you solve your debt and budgeting crises, using our proven expertise and experience to achieve financial freedom and peace of mind. Contact us today for a free consultation, either through our Ottawa headquarters, 613-237-5555, or our fully bilingual Gatineau office, 819-776-7777, Email: [email protected] or book online.

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