Over the course of a mortgage
transaction there are a number of different liens that can arise. For brokers
who don’t invest time in performing preliminary searches on their deals before
submitting them into the mortgage application process, this can often come up
on closing.
Some liens are much easier to overcome,
but on the other hand, depending on the lender, the type of lien or even the
mere presence of a lien can significantly impact your commitment for financing.
Let’s review some of the different
types of liens that commonly come up:
- Tax Liens –
CRA liens can be a huge problem. If the deal is an A deal and a purchase
mortgage a bank may refuse to fund without proof the tax debt is paid
(even if there are proceeds in the mortgage to pay the tax debt). In
addition, sometimes a tax lien can total more than the equity available in
the house. The only saving grace is that if the tax debt exceeds the
equity available for financing and your lender is a higher risk lender and
not a bank it is possible that you can negotiate a lump sum payment to CRA
on behalf of your client for a “postponement” so that they allow your
mortgage to go on title in front of their lien.
- Condo Liens
– If a client gets behind on their condo fees or for some other reason
owes the condo corporation money and hasn’t paid – the condo corporation
can put a lien on the condo. Condo liens can typically be overcome by
paying the debt. Condo liens are less impactful to a mortgage closing than
a tax lien.
- Property
Tax Liens – Much like condo liens, property tax liens can be applied when
property taxes or water bills are not paid. Unlike tax liens, the
likelihood of obtaining a postponement related to property taxes are slim
to none and property tax liens can actually supersede the lien related to
the first mortgage.
The best way to overcome a lien on a
property is to uncover it quickly. You can search encumbrances on a property to
learn about liens as well as any other registered encumbrances. Discovering a
lien even before your application is submitted to a lender for financing allows
you to help your client come up with solutions to resolve this issue. To your
client this could mean the difference between securing their financing or not
and can even result in your client paying a higher interest rate and cost to
borrow. Going the extra step to investigate your application at the point of
application shows your client you are the expert and their trusted advisor. The
best way to achieve this is by pulling an instrument image.
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