Things You Need to Know About Tax Sales

Tax SaleI recently received a flurry of telephone calls, emails and texts after the front page of the local newspaper featured the photograph of one of five properties that are being sold by the municipality for tax arrears.  

A tax sale, also known as property tax lien sales, tax foreclosure properties or municipal tax sale properties is the sale of a property by a municipality to recover unpaid property taxes on the property. A property is eligible for a tax sale when the property taxes are in at least their fourth year of arrears.  

Unlike when a bank sells a property when the owner is in default of making mortgage payments, referred to as a Power of Sale, a municipality does not have to obtain market value for the property. They only have to obtain the amount of taxes owing (including interest and penalties), plus their costs in conducting the tax sale.

OntarioTaxSales.ca  shows every tax sale property for sale in Ontario.  The website homepage states “These properties are usually offered for sale for prices well below market value.”  A Wasaga beach cottage is reported as selling for $107,000 below its 2013 assessed value.  Tax Sale

200 acres in Wasaga beach is advertised as having sold for $971,000 below its 2013 assessed value. Tax Sale

Somewhat unusual that when buying a property being sold for outstanding taxes, the property is not made available to view.  The home owner is not obligated to allow people to view the house or the property.  This is most likely the reason that houses sold under such unfortunate circumstances often sell far below market value.  Prospective buyers are unable to satisfy themselves with regards to the condition of the home and therefore are wise to factor this into their purchase price.

Another reason that properties sold by this process usually sell for much less than they are really worth is that the municipality is not required to evict people who may be living on the property. If you wish to evict people who are living there, you should consider hiring a bailiff or lawyer to handle the eviction process.  

Similar to when you buy a property sold under “Power of Sale” proceedings, you purchase the property “as is”. There are no representations or warranties of any kind.  If when you take ownership of the property the furnace doesn’t work, you’re out of luck.  

Tax sales are conducted either by public tender or by public auction. More than 90% of the tax sales in Ontario are conducted by Public Tender. 

If you have any questions about tax sales, leave a reply below and I’ll be glad to answer your questions.

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