“There’s a lien on the title,” are words that no one generally wants to hear.
But the good news is that despite having a builders’ lien on the borrower’s title, not all is lost. And while it’s never a fun surprise for brokers when a lien is discovered, there are ways to get through the process.
And despite the unfortunate circumstance, the stories behind why the lien is present often offer a little entertainment and usually include something to the effect of:
- “I didn’t know the lien was there”
- “I’m sure that I paid it”
- “They said they discharged the lien!”
- “We already negotiated a settlement”
Now, it’s entirely possible that the borrowers are telling the truth and these stories are completely plausible. Nevertheless, and regardless of the reasons, the lien needs to be discharged. This will depend on the province that the lien was filed in as to how it will be handled. But your lawyers will be able to sort out the details of the lien and discharge it at closing.
However, from a broker’s point of view, it’s important to get all of the information that you can.
Information that includes:
- When was the lien registered?
- What was the full amount claimed?
- Proof of any payments for the work that gave cause to the lien.
By gathering all the appropriate information, the broker can inform the lender of all the details of the lien on the borrower’s title. This in turn, gives the underwriters adequate evidence to decide how best to write the deal. Lenders will typically underwrite the deal with the lien and add in some accrued interest, assuming that the full amount is still owing.
So, when working out the net proceeds that the borrower will receive from a re-finance, it’s wise to use the full amount owing. That way, if it turns out to be less, then that’s a bonus for the borrower.