Lien on Your House: How to Remove it & What does it Mean?

In British Columbia, having a lien placed on your home can be a serious concern, especially if you’re already facing financial hardship. Whether it’s a result of unpaid debts, a contractor’s claim, or government action like CRA debt, a lien can limit your ability to sell or refinance your property. But what exactly is a lien, and what can you do if one has been registered against your home?

In this post, we’ll break down the basics of property liens in B.C., your legal options to deal with them, and how liens are handled in bankruptcy and consumer proposals under Canadian law.

What Is a Lien on a House?

A lien is a legal claim or encumbrance placed on a property by a creditor. It gives the creditor the right to be paid out of the proceeds if the property is sold. In British Columbia, liens are commonly registered on title through the Land Title and Survey Authority (LTSA) and are often the result of:

• Unpaid property taxes (municipal or provincial)
• Judgments from a civil court case
• Construction or builders’ liens
• Canada Revenue Agency (CRA) debts
• Spousal or child support arrears

Once registered, a lien becomes part of the title of your property and must be addressed before the home can be sold or refinanced. The BC Builders Lien Act governs construction liens in British Columbia.

How Does a Lien Affect You?

A lien can prevent you from:

• Selling your home: Most buyers will require clear title before closing a sale.
• Refinancing your mortgage: Lenders typically will not issue a new mortgage until all liens are removed.
• Accessing equity: Home equity lines of credit (HELOCs) may be restricted if a lien is on title.

In short, a lien can tie up your home’s equity and severely limit your financial options. If you’re struggling with debt that led to the lien, our guide on managing personal debt can help you understand your options.

Recommended Reading: Does ICBC Debt Go Away? Guide for BC Residents

How to Remove a Lien in B.C.

Depending on the type of lien and your financial situation, there are several ways to have a lien removed:

1. Pay the Amount Owed

The most direct method is to pay the debt in full. Once the debt is satisfied, the creditor should file a discharge with the LTSA to remove the lien. You may need to follow up to ensure this is completed.

2. Negotiate a Settlement

In many cases, you may be able to negotiate a lump-sum payment or payment plan with the creditor. Be sure to get any agreement in writing, including confirmation that the lien will be removed once terms are met.

3. Challenge the Lien in Court

If you believe the lien was filed in error or without proper cause, particularly in the case of builders’ liens. You may be able to apply to the Supreme Court of B.C. to have it removed. Legal advice is strongly recommended in these cases.

4. Apply for a Court-Ordered Sale

If the property is up for sale, the court may approve the sale and order the liens paid from the proceeds. This may be an option if multiple creditors are involved.

Liens under Bankruptcy in B.C.

If you’re considering bankruptcy, it’s important to know that bankruptcy does not automatically remove a lien. Here’s how liens are treated in a bankruptcy proceeding:

• A valid, registered lien is considered a secured claim.
• The lienholder maintains their right to the collateral (your home) even if you go bankrupt.
• The trustee cannot sell the property free and clear of the lien without either paying it off or reaching an agreement with the lienholder.

In short, secured creditors, including those with liens retain their rights in bankruptcy. However, if there is insufficient equity or the lien is no longer enforceable, the trustee may be able to negotiate terms.

Liens under Consumer Proposals in B.C.

Consumer proposals, like bankruptcy, also do not eliminate secured debts or remove liens. However, proposals can offer breathing room:

• Lienholders do not receive payments through the proposal unless they file a claim.
• A proposal may help you free up cash flow to deal with secured claims, including liens.
• If the lien is disputed or unenforceable, the proposal process may allow time for legal resolution.

If you are unsure whether a lienholder has a valid claim, consult with a Lawyer who can review the registration and help determine your legal options.

To understand whether a consumer proposal is worth it for your situation, consider consulting with a Licensed Insolvency Trustee.

Judgment Creditors and Property Liens in B.C.

A judgment creditor is a person or entity who has obtained a court judgment confirming that a debtor owes them money. In British Columbia, once a creditor has a valid judgment, they may register that judgment against the debtor’s real property under the Land Title Act (commonly referred to as filing a “judgment lien”). Understanding the difference between secured and unsecured debt can also be useful in navigating your debts when dealing with judgment liens.

How Judgment Liens Are Registered

• The creditor must have a final money judgment from the B.C. Supreme Court or Provincial Court.
• The judgment can then be registered in the Land Title and Survey Authority (LTSA) against any real property in the debtor’s name.
• This encumbers the property and may prevent a sale or refinancing unless the lien is paid or discharged.

Expiry and Renewal of Judgment Liens

• A judgment registered against land in B.C. is valid for 2 years.
• It can be renewed for additional 2-year terms if the judgment remains unsatisfied.

Impact of Bankruptcy or Consumer Proposal on Judgment Liens

When a debtor files a bankruptcy or a consumer proposal, certain legal protections and limitations apply to judgment creditors:

1. Stay of Proceedings (Section 69 & 69.3, BIA)

Under the Bankruptcy and Insolvency Act (BIA):

• Section 69(1): Upon bankruptcy, all legal proceedings and enforcement actions by unsecured creditors are stayed, unless the court orders otherwise.
• Section 69.3(1): A similar stay of proceedings applies in a consumer proposal, effective from the filing date.

This stay includes:

• Enforcing a registered judgment lien
• Commencing foreclosure or execution
• Renewing a judgment lien registration

Implication: If the 2-year registration window expires during a bankruptcy or proposal, the creditor cannot renew the lien without first getting permission from the Court. If the stay remains in place, the lien may lapse.

2. Treatment of the Judgment Lien Itself

• A judgment lien is not a true “secured claim” under the BIA unless the creditor had perfected a valid legal or equitable security interest prior to the bankruptcy or proposal.
• However, once registered against land, the lien functions like a charge on title and gives the creditor a right to be paid from proceeds on sale.

The key question becomes whether the lien is treated as a secured claim or a provable unsecured claim in the insolvency proceeding.

In Bankruptcy:

• If the lien was registered before the date of bankruptcy, it may give the creditor a secured interest in the property.
• If the property has no equity (i.e., mortgage debt exceeds value), the lien may have little practical value, and the creditor will often be treated as unsecured.

In a Consumer Proposal:

• The judgment lien survives the proposal unless the debtor negotiates to remove or settle it (the proposal affects only unsecured debts).
• The lien creditor is not required to accept the proposal, but may still be stayed from enforcing or renewing the lien.

3. Court Discretion and Removal of Liens

A debtor (or trustee) may apply under Section 243 of the BIA or under court rules to discharge a judgment lien if:

• It is determined the creditor has no security interest (i.e., they are an unsecured creditor).
• The lien interferes with realization of the bankrupt estate for other creditors.
• The lien was filed improperly or for an extinguished debt.

Key Implications for Judgment Liens

What Can Debtors Do?

• In Bankruptcy: Discuss with the Licensed Insolvency Trustee whether the lien is enforceable and whether the property has sufficient equity.
• In a Proposal: Discuss with the Licensed Insolvency Trustee on negotiating directly with the judgment creditor to remove the lien as part of the settlement.

A lien on your house in B.C. is not the end of the road but it does require careful consideration. Whether you resolve it through payment, negotiation, or insolvency options like a consumer proposal or bankruptcy, taking proactive steps is key.

At C.E. Craig & Associates Inc., we help individuals across British Columbia understand and manage complex debt situations, including liens and other secured claims. If you’re facing financial uncertainty and are unsure of your options, we’re here to help.

Reach out to us for a free, confidential consultation.