How the CRA Can Take Your Home (Yes — Even If Your Mortgage Is Paid)
You think your home is safe. You think you paid all your taxes. But there’s one type of debt that gives the Canada Revenue Agency (CRA) the power to seize your property ahead of your mortgage lender.
No, this is not a joke. And most Canadians have no idea this exists. Even if you’re current on your mortgage, even if your bank is registered on title, the CRA can still take your home. How? That’s what we’re unpacking today. We’ll crack open a real Canadian court case, one decided in 2020, that every Canadian homeowner needs to know. We’ll break down how this could happen, how to protect yourself, and what it means if you’re buying, selling, or refinancing in Canada.
Around here we break down the stories that really matter today. So, let me ask you something: if you’ve got a mortgage on your home and you’re paying it every month, who really owns the property? Most people would say the bank — at least until the mortgage is paid off. But what if I told you that someone else could jump ahead of the line?
That even if your mortgage is current and your bank is registered on title, someone else could legally come in and take the home. Not through shady back‑door dealings, not because you missed your payment, but because of a type of debt most Canadians don’t even realize they missed.
And when this happens, your lender has no legal standing to stop it. No warning. No phone call. Just a claim. This isn’t theory. This is not an urban legend.
The Court Case That Blew the Lid Off
In 2020, the federal appeals court ruled in favor of CRA, confirming that in certain cases, they have the legal right to take proceeds from the sale of your home **before** your lender sees a single dollar. And this is something that every Canadian should know about — because it doesn’t just affect investors. It doesn’t just apply to businesses. It actually affects **anyone** who’s ever collected GST or HST, filed as self‑employed, or thought they were in the clear just because their mortgage was paid on time.
The case is commonly referred to as Toronto‑Dominion Bank v. Canada Revenue Agency (2020). At the centre: a man who owned residential property, had a mortgage with TD Bank, and had also run a sole proprietorship. Like a lot of small business owners, he collected HST from his clients. But here’s the one thing: he never remitted it.
Now, you might think: “Okay, the CRA could just go after the business account, not the home.” Not exactly. Instead, when he sold his residential home, the CRA claimed that part of the sale proceeds — yes, the money that TD Bank thought was theirs — belonged to CRA because under Canadian tax law, when GST/HST is collected and not remitted, that money is considered to be held **in trust** for the government. The trust attaches to your assets, including real property.
So, what is this “Deemed Trust”?
“Deemed trust” is a legal concept in Canadian tax law that gives the CRA serious power. When someone collects GST or HST — whether you’re a business owner, a landlord, an independent contractor — that money technically never belonged to you. Even though it landed in your account, legally it was already “theirs”. And if you don’t send it back, the CRA doesn’t just treat it like any old tax debt. They treat it like trust money — meaning it’s theirs, even if it’s been mixed into other accounts, even if it’s been used for something else.
And that trust **attaches** to your assets. So when you go to sell your home, refinance, or pull out equity, the CRA’s claim on that debt can emerge — ahead of the bank. The court confirmed in the TD case that this applies even though the mortgage lender was ahead on title. Your bank could think they’re safe. They’re not.
What Does This Mean For You as a Homeowner?
If you’ve ever operated a business — even part‑time, even on the side — collected GST/HST and didn’t remit it, the CRA could reach your property. They don’t forget. Even a small amount can trigger this. The scary part? You won’t even necessarily see it coming.
If you’re applying for a mortgage or refinance: Most lenders are now doing extra due diligence on self‑employed applicants — and for a very good reason. Some are even asking for GST/HST statements before advancing funds. Why? Because if CRA swoops in after the deal closes, the lender is the one taking the hit.
If you’re buying a home, especially from someone who’s self‑employed or runs a business: you need to be extra careful. If they’ve collected GST/HST and haven’t submitted it, CRA could still have a legal claim on the sale proceeds. Even if nothing shows up on title. Even if you're doing everything by the book. The trust doesn’t always pop up in a standard lien search.
What Can You Do to Protect Yourself?
- Check your GST/HST history: If you’ve ever been self‑employed, even part‑time, check your filing and remittance history. Make sure there are no outstanding balances with CRA. Don’t guess — confirm.
- Be transparent with your lender: If you’re refinancing or buying and you've got self‑employment income or business activity, let your mortgage professional know. Lenders are now asking questions around GST/HST because they’ve seen this risk.
- Buyers: ask the right questions of the seller: If you're purchasing a property from someone who ran a business, get your lawyer to dig into whether there are GST/HST issues. A “tax compliance declaration” from the seller could save you major headaches.
Quick Recap of Key Legal Features
- The trust arises **the moment** GST/HST is collected and not remitted — no bankruptcy or formal collection is required.
- The trust can apply even if the lender is a secured creditor with a valid mortgage registered on title.
- No defense for the lender “I did not know” or “I acted in good faith” won’t necessarily stop CRA in these cases.
Bottom line: if unremitted GST/HST exists, CRA gets paid — ahead of everyone else. It’s powerful. It’s quiet. It’s very real.
Why You Should Care (Even If You Think You’re Fine)
Maybe you didn’t collect GST/HST knowingly. Maybe you had a side hustle and forgot. Maybe you sold something as a “side business” and didn’t register. Whatever the scenario — because of the trust claim, you could be at risk. And because the issue can hibernate until something triggers it (like a sale, refinance, or closure of business), you might not realize the danger until it’s too late.
What Now? (Call to Action)
Here’s what I want you to do right now: take a deep breath. Then pick up your phone or log in to your accountant portal and check your GST/HST remittance history. If there’s a question mark in your mind — reach out. Talk to your mortgage advisor. Talk to your lawyer. Make sure your home is actually safe.
If you’re in the Greater Toronto Area and you’re buying, selling, refinancing or just want to double‑check your situation — we’d love to hear from you. Let’s review together and make sure you’re covered. Drop us a message, we’ll set up a time to chat here
Because here’s the thing: your home is supposed to be your sanctuary, your safe place. Don’t let something hidden pull the rug out from under you.
Stay smart. Stay safe. And above all — stay positive.
You’ve got this.
COURT CASE link here