In today’s volatile real estate market, there is absolutely no doubt that the Taxman will go after your house. It’s your biggest asset and the surest way for him to secure your tax debt and get paid.
If you stay calm and act reasonably, there are things you can do, and ways you can use your home equity, to help pay the CRA and protect your home.
Here are the answers to common questions about tax liens… to help you understand what to do, and where to turn for help.
How do I know if there is a lien registered against my home?
CRA process usually advises you by letter that a Certificate has been registered in Federal Court for the arrears owing. This is usually the opening move in a plan to register a lien against your home and/or real estate property. If and when the property lien is registered, CRA typically advises you by letter.
In some cases, though, you may not discover there’s a lien until you try to sell your home, or refinance the home with a new or bigger mortgage
Does a tax lien mean I have lost title to my home?
No. The lien is a registration on the title that prevents you from closing a sale or refinancing your home until you make arrangements with the CRA for the proceeds from any sale or home refinancing to be directed to the CRA against payment of your debt. When your tax debt is paid in full, the lien will be removed by CRA.
Does a lien mean the CRA will take my home?
Not immediately. A lien is registered as security against your tax debt. The CRA will not take possession of your home and sell it tomorrow. But if your tax balance remains unpaid, eventually the CRA may register a Writ of Seizure and Sale, which is very serious enforcement action. If you still do not make arrangements for settlement of your tax debt, the CRA then has the legal authority to authorize the Sheriff to seize your home and sell it. The buyer would assume any mortgages on the property and any other debt such as property tax arrears. Any proceeds remaining from the sheriff’s after your tax balance is discharged would be paid to you. But your home will have been liquidated to satisfy your tax debt.
Does this happen? Yes. How quickly is often a factor of market conditions. When real estate markets are booming, the CRA seems to be happy nurturing its investment in the growing value of your home. But when market start to cool, the CRA may be prompted to protect its interest and move in to get the most it can from a forced sale of your home. In today’s market, the danger of CRA foreclosure on a lien is higher.
If CRA lien has registered a lien, can I sell my home, or renew the mortgage?
Yes. Even with a CRA lien, you can access the equity in your home through a secured line of credit, mortgage, or the sale of your home. But because CRA has registered security against that equity, the proceeds of any sale or financing cannot be paid to you until the CRA’s interest in the property (being the amount of your tax arrears) has been paid out in full. Thereafter, any remaining proceeds are payable to you.
If you are borrowing from home equity, once the bank, or other lender, confirms the amount of money you are approved to borrow, the CRA will agree to lift the lien as soon as the CRA’s position against the property is paid out of the funds advanced. The CRA issues a letter to this effect so that the lender will advance you the funds.
If you are selling your home, CRA will agree to lift the lien when the proceeds of the sale are transferred to your real estate lawyer. The CRA’s position against the home is always paid out before the balance of the proceeds are paid to you.
What if the tax debt is more than I can get from selling my house?
If the sale price of your home is not enough to discharge the tax debt in full, the CRA will be paid whatever is available from the proceeds, after the mortgage holder and any other creditors ahead of its claim are paid out. Any money the CRA receives from your home sale is applied against your tax balance to reduce it. Whatever is left unpaid remains as a tax balance you still owe to the CRA.
What if there are other people on title besides me?
CRA can only realize proceeds from your share of the equity in the property. If you sell your home, only your share of the equity will be paid out the CRA. The CRA cannot seize your wife’s, or any else’s equity. However….
If you have transferred your equity (title) to someone else without receiving payment that equates to the fair market value of the share of your equity at the time of the transfer, CRA may consider assessing that someone else for all or part of your tax arrears. This other party cannot be assessed by the CRA for more than the fair market value of their share in the property.
Can I go bankrupt to get rid of the tax lien?
Filing for bankruptcy, or filing a consumer proposal, does not automatically discharge a lien against your property. Typically, insolvency trustees don’t take the time and effort to negotiate with the Canada Revenue Agency to settle the CRA’s interest in your home. So the lien survives the insolvency filing and continues to accrue interest.
For that reason, it’s best to deal with DioGuardi The Tax Brokers instead of running to a trustee or debt settlement firm.
DioGuardi can broker a deal to settle your tax debt and get the lien removed.
The Bottom Line: Tax liens are serious, complicated, and too dangerous for do-it-yourself solutions.
Call 1-877-TAX-7902 to book an appointment with DioGuardi The Tax Brokers.
Or click here: http://www.dioguarditaxbrokers.ca