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Part 1 – Writ of Seizure & Sale

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Writ of Seizure & Sale – Part 1

A property lien is a legal claim that has been filed against a particular real estate tract. The entity holding the lien is entitled to a specific dollar amount once the property is sold. The purpose of this sort of lien is to ensure that a debt is paid. The property is the collateral against the amount of the debt.

There are different types of property liens available to creditors in Canada.

A Writ of Seizure and Sale is an order that a court issues permitting the petitioner to take ownership of a particular property and then to sell it after taking possession. This sort of order is common when a borrower has gone into default on an obligation, and the purpose of the writ is to let the creditor take possession — with the assistance of officers from law enforcement if necessary.

A creditor can’t run out and get a writ of seizure and sale against you just because you miss a payment or two. This is what happens when you have failed to pay attention to all of the creditor’s other attempts at getting you to pay and have gone into default instead. Once a creditor seizes your property, he can sell it at a rock-bottom price to get at least some of his money back.

If the Canada Revenue Agency (CRA) attaches a lien to your property, that means that you haven’t been paying your income taxes, and the government has gone to significant lengths to get you to pay another way, but you have ignored their notices. The CRA views a writ of seizure and sale as an enforcement action, and if you own properties and haven’t been making any effort to pay your back taxes, the CRA will use the tool to motivate you to take care of your tax debt.

Sometimes property owners are surprised to find that the CRA has attached a lien to their property; in some instances, the owners never know until they arrange to sell the property, and the title search reveals the existence of the lien. If you have been getting letters and calls from the CRA but you have ignored them, and then some time goes by when you don’t hear anything, they may have gone ahead and attached the lien. CRA policy dictates that the agency advises you via letter when they have registered a certificate in federal court identifying the relevant property and indicating that they plan to register a lien. However, this letter is just a warning, and the CRA does not always follow through and register the lien. If your correct address is not on file with the CRA, though, they may file the lien without your knowing. Performing a title search before you start to sell the property is wise to make sure that no liens are registered against the property.

Just because the CRA files a certificate does not mean they go ahead and file the lien. They might be using the certificate to lock down an interest so that the debtors pay off their tax debt before they liquidate their interest in the property in question. At other times, the purpose of the certificate is just to make sure the property owner knows that the CRA is serious and will then open up a dialogue with the agency to get the taxes paid. Sometimes, though, the CRA has every intention of pursuing the seizure and sale of the property.

If the CRA files a lien against your primary residence, they generally will not file a writ of seizure and sale, because CRA policy forbids that action when it would lead to the property owner becoming homeless. However, if the property is a rental property or a vacation home, then the CRA is more likely to pursue the seizure and sale aggressively if the owner does not initiate a payment plan after learning of the certificate.

It’s important to understand that even if the CRA attaches a lien to a property, you still retain title to the property. It just means that you can’t sell or refinance that property until you have paid your tax debt in full, or you have a written agreement in place to send the proceeds from that transaction to the CRA so that your tax debt is paid in full.

If the CRA registers the certificate in federal court and your tax balance still remains as an obligation, the CRA will also register a Writ of Fi Fa. This would command a local sheriff to seize your property and sell it, giving the CRA its debt and then delivering any remaining proceeds to you. This is one of the most serious enforcement steps out there, though, and as stated earlier, this would only occur against an income property or a vacation home, not your primary residence, and you would have to ignore a great deal of correspondence from the CRA for this to take place.

After you find that a certificate has been registered against your property and a lien is in place, you can still access equity in the property to make payment arrangements with the CRA. As long as you are willing to establish a contract indicating that the CRA will receive the first proceeds from any transaction, you generally can do what you want with the property. The CRA is only interested in getting the tax debt paid.

If you decide to sell the property, here is how the proceeds would be distributed: to your mortgage lender, to any secured lenders (as in a second mortgage), the CRA, any other creditors with liens, and the property owner. This means that it is quite possible for you to end up with no proceeds from the sale of your home, particularly if your tax liability is significant and you have a number of other creditors lined up with registrations. If you can’t satisfy your CRA obligation with the sale of the property, then your balance goes down by what the CRA received — but you still owe the CRA the rest, and now you don’t have a house. Given the fact that even filing bankruptcy can’t satisfy a lien, you want to make sure that you take care of this — ideally before you get that first letter, but if not, as soon afterward as possible.

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Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
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