WHAT HAPPENS WHEN YOU DON'T PAY YOUR MUNICIPAL PROPERTY TAXES

By VIVIAN L. MANNING, Municipal Law Department (retired)

Property owners, not otherwise exempt under the provisions of the Assessment Act , R.S.O. 1990, c. A. 31, are required to pay real property taxes to the municipality in which the property is situate. Real property taxes are composed of taxes payable to the municipality and to the school board, and other taxes, charges and liens affecting the property which, by statute, may be collected "in like manner as municipal taxes".

If such taxes are not paid by their due date, section 382 of the Municipal Act, R.S.O. 1990, c. M. 45 states as follows:

The taxes due upon any land with costs may be recovered with interest as a debt due to the municipality from the owner or tenant originally assessed therefor and from any subsequent owner of the whole or any part thereof, saving that person's recourse against any other person, and are a special lien on the land in priority to every claim, privilege, lien or encumbrance of every person except the Crown, and the lien and its priority are not lost or impaired by any neglect, omission or error of the municipality or of any agent or officer, or by want of registration.

The Municipality may choose to proceed to collect the taxes in arrears by way of action, under s. 383 of the Act, as a debt due to the municipality, or by way of proceedings under the Municipal Tax Sales Act, R.S.O. 1990, c. M.60. This paper shall deal with procedures under the Municipal Tax Sales Act , under the following topics:

Registration of a Tax Arrears Certificate
Sending of First Notices
Sending of Final Notices
Sale by Public Tender
Sale by Public Auction
Cancellation Certificate
Extension Agreement

REGISTRATION OF A TAX ARREARS CERTIFICATE

Under the provisions of the Act, the Treasurer of a municipality may register a Tax Arrears Certificate against the title to the lands, if improved, on the 1st day of January in the third year following that in which the real property taxes become owing, or, if the lands are vacant, on the 1st day of January in the second year following that in which the real property taxes become owing. The information on the Tax Arrears Certificate will include the taxes and arrears owing , a legal description of the property to which the Tax Arrears Certificate applies, and information with respect to the payment of the Cancellation Price and the time period in which the Cancellation Price may be paid. The Act defines Cancellation Price as follows:

"cancellation price" means an amount equal to all the tax arrears owing at any time in respect of land together with all current real property taxes owing, interest and penalties thereon and all reasonable costs incurred by the municipality, after the Treasurer becomes entitled to register a tax arrears certificate under section 3, in proceeding under this Act or in contemplation of proceeding under this Act and, without restricting the generality of the foregoing, may include,
(a) legal fees and disbursements,
(b) the costs of preparing an extension agreement entered into under section 8,
(c) the costs of preparing a survey where such is required to register any document under this Act, and
(d) a reasonable allowance for costs that may be incurred subsequent to advertising under section 9;

It is important to note that the amount shown on the Tax Arrears Certificate is not the Cancellation Price, and the Cancellation Price will always exceed the amount shown on the Tax Arrears Certificate.

SENDING OF FIRST NOTICE

The Treasurer, or designate, must, within 60 days of the registration of a Tax Arrears Certificate, send a notice of the registration of the certificate to the assessed owner of the land, the assessed tenants (if any, and only if the land is improved), the spouse of any assessed tenant, every person appearing by the register of title or the abstract, and by the index of executions, or writs received by the sheriff, to have an interest in the land as of the time of closing of the land registry office on the day the tax arrears certificate was registered, and to the spouse of the registered owner of the lands.

After the sending of the notices, the Treasurer must then make and register a statutory declaration stating the names and addresses of the persons to whom notice was sent.

SENDING OF FINAL NOTICE

If the Cancellation Price is not paid by the end of 280 days from the date of the registration of the Tax Arrears Certificate, the Treasurer, within 30 days of that 280 day period, must send to the persons entitled to receive notice, as set out above, a final notice that the land will be advertised for public sale unless the Cancellation Price is paid before the end of the one-year period following the date of the registration of the Tax Arrears Certificate.

After the sending of the Final Notice, the Treasurer will then make and retain, but not register, a statutory declaration stating the names and addresses of the persons to whom final notice was sent.

If the Cancellation price remains unpaid one year after registration of the Tax Arrears Certificate, the Treasurer verifies that no payment has been made, and determines whether to proceed to sell the land by Public Tender, or Public Auction.

SALE BY PUBLIC TENDER

If the Treasurer determines to sell the land by Public Tender, the Land must first be advertised for Public Tender once a week for four weeks in a local newspaper, and also once in the Ontario Gazette. If there is a successful tenderer, the Treasurer must notify the successful tenderer, and the successful tenderer then has 14 days to pay the balance of the amount tendered, Land Transfer Tax and accumulated taxes, at which time the Treasurer declares the successful tenderer to be a successful purchaser, and proceeds to register a Tax Deed transferring title to the lands to the successful purchaser. The Treasurer then pays the proceeds of the sale, minus the Cancellation Price, into Court.

SALE BY PUBLIC AUCTION

If the Treasurer chooses to proceed by way of Public Auction, the land must be advertised in the same manner as for tender. The Treasurer conducts the auction and the highest bidder is declared to be the successful purchaser, if the bidder immediately pays the amount of the bid, the applicable land transfer tax and the accumulated taxes, in cash to the auctioneer. The Treasurer then proceeds to register a Tax Deed and pay the proceeds into Court in the same manner as if the land had been sold by tender.

CANCELLATION CERTIFICATE

Before the end of one-year following the registration of the Tax Arrears Certificate, any person may have the Tax Arrears Certificate cancelled by paying to the municipality the Cancellation Price as of the date the payment is made. The Treasurer, upon such payment, will proceed to register a Cancellation Certificate against the title to the lands. If the Cancellation Price is paid by any person who was entitled to receive notice of the registration of the Tax Arrears Certificate, other than the owner of the land (or spouse), that person is entitled to a lien in the amount of the Cancellation Price, and in priority to any other person entitled to receive notice of the registration of the Tax Arrears Certificate, and this lien will be noted on the Cancellation Certificate to be registered. Registration of the Cancellation Certificate effectively removes the prior registered Tax Arrears Certificate, such that the land is no longer affected by that Certificate.

EXTENSION AGREEMENT

The Act allows for the entering into of an Extension Agreement between the municipality and the owner of the land, before the end of the one year period after registration of the Tax Arrears Certificate. This Agreement extends the period of time in which the cancellation price is to be paid and the agreement may be subject to such terms and conditions relating to payment as are set out in it. The Agreement must state when and under what conditions it shall cease to be considered a subsisting agreement; that any person may pay the cancellation price at any time; and that the agreement terminates upon payment of the cancellation price by any person. While the Agreement is in effect, the time period calculated for payment of the Cancellation Period does not run. If the owner defaults under the agreement, the time period begins to run again and the tax sale procedure is re-established. When the terms of an extension agreement have been fulfilled, the Treasurer will then register a Cancellation Certificate, which has the same effect as set out above.

There are further provisions in the Act and the regulations made under the Act with respect to allocation of the funds paid into Court by the Treasurer, and with respect to application of payment out, however, such provisions are not the subject of this paper.

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The above is not intended to constitute legal advice. Please contact a lawyer to clarify your legal rights.