Paper Terrorism

The term hasn't really caught  on in  Canada, except for a 2016 event in Alberta. But Paper Terrorism is becoming a common method of harassment in the US where special interest groups routinely file false liens against the homes of public officials. It's only recently that some states are introducing legislation to make this difficult. However, the average Canadian citizen is largely  unprotected. One of the more comprehensive discussions on the subject from a US perspective is here. The New York Times ran its own scary story. If you Google "Paper Terrorism" (using quotes), you'll get about 70,000 hits. Reading some of them will make you never to want to own a house.

While the lien is on file at Land Registry - where it'll probably stay for about two years while the matter is crawling its way through the court  - your home is in lockdown. You can't sell it, you can't use it for financing, and if you have a mortgage you're going to find that your relationship with the lender sours. The lien may take priority over the mortgage, and the lender will definitely not be happy about that. If you have a mortgage with the Royal Bank, for example, you have 30 days to get the lien off the title - bogus or not. After that, you're in default on your mortgage and unpleasant things may start happening. For example, the bank may simply add the lien amount to your mortgage and pay off the lien for you. (You've already given them permission to do that when you signed off on the mortgage.) The bank may hold off at the 30-day point if you can convince them that you are taking all possible measures to contest the lien, but you need to have a meeting with your banker early in the process - certainly before the 30 day period runs out. Your lawyer may want to sit in on that, or the bank may want him/her there.

On the subject of mortgages, are you considering a reverse mortgage? Many retired people find this a convenient way to raise a lot of cash. However, if there's a lien - bogus or not - sitting on your property title, and whether it's been enforced or not, you're going to run into problems. Check with your intended lender. One reverse-mortgage company didn't even bother answering an email which referenced a fraudulent lien.

One way to discharge a lien quickly - and your lender may insist on this - is to place an amount in trust with the court equal to the amount of the lien. If the contractor has placed a $30,000 lien on your house, you're going to have to leave that amount at the courthouse. Once you're finished slugging it out with the contractor, the court will decide whether the funds in trust go to the contractor or back to you. 
return to main page                   next page