Buying or selling your home can be an exciting time and should go smoothly – but a last-minute discovery of a lien on your property can cause delays, litigation, or lost deposits.
Usually, liens are cleared from the records when the debts associated with them are paid off in full. This means once you’ve paid the money you owe, the lien should be cleared. But you can also have a lien placed on your valuable asset involuntarily – a builder’s lien, for example, is registered by the construction firm to protect themselves financially and ensure they get paid for the work done.
But can you remove a lien from your valuable asset, such as your home or car? Below, we take a look at the different types of lien, lien laws in Alberta and your rights.
What is a lien on a property or car?
If you have a mortgage, or a car on finance, you will have had a lien placed on your car or home.
In simple terms, a lien is a legal right or claim by a creditor, placed against something you own such as your property or car, which relies on you paying off the debt. The purpose of a lien is so the creditor, such as the bank or car dealership, can collect what is owed to them should you be unable to make repayments.
A lien may also be placed on your property if you didn’t pay a general contractor for the work they did for you on your home.
Lien on a car
When you buy a new car and finance it through a car dealership, there is a lien upon the vehicle until you’ve paid off the loan. The purpose of the lien is to protect the dealership financially – so, if you were to stop making your car payments, they can cite the lien in court and repossess the car.
If you were to buy a used car in a private sale or through a dealer, it’s important to check that there isn’t a lien on the vehicle. Registered car dealers are required by law to make sure liens are removed from any used cars. So, if you’re purchasing a used car and find there is a lien, it must be removed.
Lien on a property
Similarly, a mortgage is a lien upon your house. In this instance, a lien is a claim that gives the bank that financed your mortgage the legal right to your property (meaning it could be repossessed) if you do not make your mortgage payments.
Liens are cleared from the records when the debts associated with them are paid off in full – meaning once you’ve paid off your mortgage, the lien should be cleared. But all liens stay with the property, so if you buy a home with outstanding liens (perhaps due to the previous owner not paying a contractor for home improvements), you assume responsibility for those debts.
With this in mind, it is important that you or your lawyer search local records for any liens on a property before you buy it. If you owe money and that debt is secured to your home, there is a lien on the property. When that debt is paid off in full, the lien is cleared from the record.
Can I dispute a lien on my property in Alberta?
A contractor may decide to file a lien and until you pay them what you owe, the lien will remain on your property.
But can you dispute the lien on your property? You have three options to remove the lien from your property records:
- Negotiate with the contractor who placed the lien – occasionally, this may involve you paying the contractor money that you feel they aren’t entitled to.
- Obtain a lien bond to discharge the lien. You have the ability to obtain a bond from an insurance company that would cover the lien amount. These are sometimes known as surety bonds or lien discharge bonds.
- File a lawsuit to vacate the lien. For this type of legal action, you will need to retain an attorney whose practice is in construction or real estate law.
Can Canada Revenue Agency put a lien on my property?
Canada Revenue Agency (CRA) is a powerful creditor that has the authority to access debt collection much faster than other creditors. If you are behind on your debt repayments, CRA has the authority and may resort to debt collection actions, such as registering a lien on your property, including property that is held jointly.
Once registered by CRA, the lien will effectively act as a mortgage. This means if you were to sell the property, you will need to pay CRA beforehand.
To check if CRA has registered a lien against your property, you can search the Personal Property Security Registry or Land Titles.
How can I remove a lien from my asset?
Having a lien on your asset, such as a property, can make it hard to sell. You can also lose your property if you’re unable to pay off your debt. To remove your lien, you will need to pay off the money you owe in full. Once paid, the lienholder will issue a clearance certificate to invalidate the lien.
Can I remove a lien on my car?
To remove the lien on your car in Alberta, the vehicle owner must pay off the money owed on the car. Once paid, the lender (or dealer) will provide you with a document that states the lien has been discharged. Once you’ve received this, the record must be changed by the provincial body that governs transportation in your province. You can give them a call and they will discuss the next steps with you.
Take control of your debt today
If you’re struggling to keep on top of your debt repayments and have had a lien placed on your property, you may be feeling overwhelmed and unsure of where to turn. Consulting with an experienced and supportive Alberta Licensed Insolvency Trustee can help you to decide on the best route forward to settle your debts.
Your options and legal rights will be explained to you clearly and with their support, you can work towards the brighter future you deserve. Contact us today for a free consultation.