Can I Renew My Mortgage With a Lien on Title in Ontario?

Your mortgage term is ending and a renewal offer is on the way, or you are about to ask for one. Then a title search or a call from your lender turns up a lien or judgment registered against your home. It is a stressful surprise, but it is often something that can be dealt with.

This article explains what the claim can mean for a lender, what Ontario law says about condominium liens, and the general routes people use to clear a claim. Because lenders set their own renewal rules, we cannot say what yours will do. A lawyer can review your title and your options.

Why a lien or judgment worries a lender

A lender wants its mortgage to be secure against the home. A claim registered ahead of, or able to jump ahead of, the mortgage puts that security at risk. Some lenders will renew with the same terms regardless, some will ask you to clear the claim first, and some may change the terms or decline. That is the lender's decision and it depends on the facts.

The type of claim matters. A condominium lien, for example, can have priority over earlier mortgages, which is a major reason lenders pay close attention to it.

How condominium liens work

If you own a condo and fall behind on common expenses, the corporation has a lien on your unit and its common interest for the unpaid amount, plus interest and the reasonable legal costs and expenses of collection. Damages or costs awarded to the corporation against an owner, plus its additional actual costs of getting the order, are added to the common expenses for the unit.

The lien expires three months after the default unless the corporation registers a certificate of lien within that time. The corporation must give the owner written notice at least 10 days before registration. A lien may be enforced in the same manner as a mortgage.

A perfected lien has priority over every registered and unregistered encumbrance, even one that existed before the lien arose. The corporation must give written notice of the lien to each registered encumbrancer, and that notice is treated as a condition of priority. Details of the current wording are worth confirming with a lawyer.

Comparing common claims on title

If the mortgage has no power of sale clause, the statutory power of sale applies, after three months of default and 45 days' notice to interested persons. If a sale happens, proceeds go first to the lender's principal and interest, the expenses of the sale and other encumbrances in order of priority, with any surplus going to the mortgagor.

Ways people clear a lien or judgment

The right route depends on who holds the claim and how much is owed. The common approaches are general rather than guaranteed.

• Pay the amount owed in full and get written confirmation that the claim is satisfied, then ask that it be removed from title.
• Negotiate a payout figure or payment arrangement, and make sure any agreement is in writing.
• Dispute the claim if you believe it is wrong, which may involve the court and a lawyer.
• Use funds from the renewal or a new loan to pay the claim at closing, if the lender agrees and your lawyer arranges the payout.
• Consult a Licensed Insolvency Trustee if your debts are larger than you can manage.

If you are thinking about a consumer proposal, note that it is available where total debts do not exceed $250,000, not counting a mortgage on the principal residence, and the term cannot exceed five years. A proposal does not prevent a secured creditor from realizing or dealing with its security unless the court orders otherwise. Likewise, bankruptcy does not prevent a secured creditor from realizing its security, though a court may order otherwise. Insolvency outcomes vary, so get advice first.

There are also credit consequences. A consumer proposal is removed from the credit report 3 years after all included debts are paid, or 6 years after signing, whichever comes first. Bankruptcy is usually removed 6 years after discharge, or 7 years with TransUnion in Ontario.

What to do next

• Ask your lender, in writing, what it requires before renewing and by what date.
• Get a copy of what is registered on title, or ask a lawyer to do a title search.
• Identify who holds the claim, how much is owed and when it arose.
• Gather statements, notices and correspondence about the claim.
• Request a payout statement and a written confirmation when the claim is paid.
• Speak with a real estate lawyer, and with a Licensed Insolvency Trustee if debt is the underlying problem.
• Start early, since clearing a claim can take time and your renewal date will not move.

Frequently asked questions