The CRA will always come looking for its pound of flesh, by way of a lien
Apparently, the Canada Revenue Agency isn’t finished with Conrad Black, even if the convicted criminal and former media mogul ended his Canadian citizenship more than a decade ago. (For those that may not remember, Black renounced his citizenship in 2002 to accept the British title of Baron Black of Crossharbour.)
According to the Globe and Mail, the CRA is blocking the recent sale of Black’s Toronto mansion by placing two liens on the property.
The sale of Conrad Black’s Toronto mansion has been put on hold after the Canada Revenue Agency placed liens against the property for $15-million in unpaid income taxes, according to documents obtained by The Globe and Mail.
The liens against the former media magnate’s mansion at 26 Park Lane Circle in the upscale Bridle Path neighbourhood were registered on May 6.
The first lien said Mr. Black is indebted to the Canada Revenue Agency for unpaid income taxes totalling $12,307,717.15.
The second lien is for unpaid income taxes of $2,771,196.84. The lien was filed by the Canada Revenue Agency on behalf of the U.S. Internal Revenue Service through the Canada-U.S. tax treaty, according to the documents.
Black’s immediate response was to dismiss it as “legal matter” that would be worked out within the judicial system. Turns out, he’s right. But don’t let his dismissive attitude mask the fact the CRA means business.
When the CRA registers a lien against a home they’re “securing an interest” in an asset. That’s a fancy way of saying they are legally laying claim to an asset’s value, because money is owed to them.
The CRA will register a lien when you have not paid your income tax, but they aren’t the only ones who can register an interest in your home’s value. Utility companies, municipalities, mortgage lenders and even residential contractors (the people hired to build or renovate homes) can register a lien against a property; typically these liens are triggered by unpaid property taxes, utility bills, missed mortgage payments or unpaid work contracts.
How to tell if there is a lien registered against your property?
Now, the CRA is actually kind. They’ll actually send you a letter—known as a Certificate—before registering an official lien. The certificate will identify the property that the lien is registered against as well as show the outstanding debt owed. Consider the certificate as a warning; it puts you, the homeowner, on notice that the CRA is just steps away from taking formal, legal action to claim the money you owe them.
Keep in mind, not every lien comes with a letter. To find out if there’s a lien on a house, run a title search.
Did I just lose my home because of a lien?
Despite what some people think should happen, Black won’t be kicked out of his home for non-payment of taxes. The CRA doesn’t typically seize a property if it would result in leaving the homeowner homeless. But by registering the lien, the CRA is laying claim to money owed. Consider it the taxman’s version of marking their territory. The lien forces you to deal with the debt—or it will prevent you from selling your property or passing it on to heirs.
Just to be clear: A lien is against the title of your property. It doesn’t transfer ownership of the property to the CRA. Essentially, the lien prevents you from selling or refinancing the property until either the tax debt owing is paid in full, or there is a written arrangement to have the proceeds from a sale or refinancing directed to the CRA for full payment of the debt.
So, Black could still sell his home, but either he would have to pay the $15 million or so of outstanding taxes to the CRA once the house sold, or the buyer would have to assume this debt (in addition to the $16.5 million for the Black mansion).
Now, if the property is not a primary residence but an income property or a cottage then you could find yourself in a forced sale situation—where the CRA proceeds with the lien in federal court, prompting you to either pay your outstanding debt, or lose title and ownership of the property, which then goes through the legal procedure of foreclosure and the home is then sold as a power of sale, to clear the debts.
What if I buy a home that has a lien?
For most buyers, you will find out about a lien against a property when your lawyer performs a title search. But, as many buyers know, this search often comes at the end of the home-buying process—typically a week or two before closing. At that point you can walk away from the purchase or you can work with the seller and your respective lawyers to draft up an agreement that will confirm payment of the outstanding debt to the registered owner of the lien, once the house is actually sold. (This is when lawyers would step in, take a portion of the proceeds equal to the outstanding debt, and remit that to the lien-holder.) Be prepared though: at any time the deal could sideways, and you will more than likely incur more legal fees (more work, means more fees).
The only other time that you may run into a lien that isn’t obvious is through the purchase of a tax sale property. For more on this, see my previous post.