You have CRA arrears and every bank has stopped returning calls.
On a commercial property this is a security ranking problem before it is anything else. Understanding that makes the conversation with a lender a good deal less personal.
The short answer
Unremitted source deductions and GST are held in trust, so the Canada Revenue Agency can register a claim that ranks ahead of a mortgage, and the usual fix is paying the arrears out of the advance at closing.
- Refinance and clear the arrears at closing. The most common structure by some distance. Your lawyer confirms the payout and the lender registers into clear title.
- A second mortgage behind the existing first. Useful when the first mortgage carries a rate worth keeping. Smaller amount, higher rate on that portion only.
- A payment arrangement with the agency. An arrangement in good standing is documentation a lender can read, and in some cases it is enough on its own.
- An equity based private lender. Where the property carries sufficient value, some lenders will fund on the equity with less attention to the operating position. Priced accordingly.
The situation as you experience it
A slow quarter, a large remittance, and the balance grew from something manageable into something that shapes every conversation. Now the bank has gone quiet and you are not sure whether it is the arrears or something else.
It is the arrears, and the reason is more mechanical than most borrowers expect.
Why this happens
Unremitted source deductions and GST are held in trust. That money was never the business's to keep, and the Canada Revenue Agency has powers on trust amounts that ordinary creditors do not have, including registering a claim against the property.
Such a claim can rank ahead of a mortgage. A lender advancing into second position behind an amount that may grow has no reliable security, so it does not advance. That is the whole of the objection.
It is not a judgement about you or the business. It is a lender protecting its position, which is the same thing it does on every file.
What your options actually are
Refinance and clear the arrears at closing. The most common structure by some distance. The new mortgage pays the balance out from the advance, your lawyer confirms the payout, and the lender registers into clear title. Our refinance and equity take out page covers how that is sized.
A second mortgage behind the existing first. Useful when the first mortgage carries a rate worth keeping. Smaller amount, higher rate on that portion only. See private and second mortgages.
A payment arrangement with the agency. Worth exploring before you apply for anything. An arrangement in good standing is documentation a lender can read, and in some cases it is enough on its own.
An equity based private lender. Where the property carries sufficient value, some lenders will fund on the equity with less attention to the operating position. Priced accordingly.
When borrowing is not the right answer
This deserves saying plainly. Borrowing against the building to clear tax debt makes sense when the underlying business is viable and the arrears were a cash flow event: a bad season, a large receivable that came late, a one time cost that landed at the wrong moment. In that case the loan solves a timing problem and the business carries it from there.
It does not make sense when the arrears are a symptom rather than an event. If the business is not generating enough to meet its remittances in the ordinary course, the balance will rebuild next quarter, and now there is a mortgage payment on top of it. At that point the building is carrying a risk it was not carrying before, and the problem has been postponed rather than solved.
Nobody can tell which of those two you are in from the outside, and it is not a question to answer quickly. Where the situation is serious, speak with your accountant or a licensed insolvency professional alongside a broker. Those conversations sometimes lead somewhere better than a mortgage, and there is no cost to having them first.
What we would need to look at it
The property address, the current mortgage balance and rate, the approximate amount owing to the agency, and recent operating statements. From that we can tell you what the property supports, what clearing the arrears would cost to carry, and whether the numbers hold up afterward.
Tax arrears and lending.
Related situations
Talk it through before deciding anything.
Send the property details, the approximate balance owing and the current operating numbers. We will tell you what is possible and whether borrowing is the right move at all.