A very strong advantage of purchasing a property at tax sale is the ability to acquire a property at a price vastly below market value. Municipalities conducting tax sales need to recoup the amount of taxes plus penalties.
Things you need to know about Tax Sales
When are tax sales most common?
Spring and fall are the busiest seasons for tax sales with winter being the slowest. Because tax sales are very time-consuming for municipalities, they generally engage in tax sales during periods of time when they are typically less busy. Municipality staff is generally busy preparing the following year’s budget during the winter and this reason coupled with the winter weather’s ability to dissuade potential buyers from traveling for property viewings and tax sales, leads most municipalities to avoid tax sales during the winter months. Similarly, many municipal workers as well as potential buyers tend to take their vacations in the summer months and therefore there are fewer tax sales during those months as well.
Will my deposit be returned if I change my mind?
Unfortunately, there is no way to have your money returned after you have been named the highest tenderer or the successful purchaser. While this may seem harsh, you must understand that the reason for holding the tax sale in the first place is for the Municipality to recover unpaid taxes, not to spend more on advertising and hosting a sale and then recover nothing.
If the Municipality were to return your money, the tax sale would need to be cancelled and held again. This would cost the Municipality advertising costs and legal fees which would need to be added to the Minimum Tender Amount on the new sale. As a result, there is nothing to guarantee that a new purchaser could be found to meet the new Minimum Tender Amount. Municipalities could not risk losing their tax recover as well as double the advertising costs therefore if you choose to back out of a sale after being named the highest tenderer, you will lose any amount already provided to the Municipality.
It is sometimes possible to get your money back if you submit a tender and change your mind before the tender submission deadline has passed. If this is the case, you must submit a written request to the Municipality Treasurer as soon as possible. If you wait until after the deadline has passed you run the risk of losing your deposit.
Will I have a chance to see the property before placing a tender or a bid?
When a tax sale is held, there is generally much less information available about the property and any structures resting on it then you would find if you were purchasing the property from its owner. For this reason, you will likely be tempted to enter a tax property to have a look around and see what you can find out. Unfortunately this is not permissible. You do not have the right to enter a property until after the tax sale because up until that point, the Municipality does not own the property, the original owner still does.
You may view the property from the street or sidewalk or from a boat on any body of water the property may abut, but you do not have the right to step foot on the property and will likely be met with hostility if you choose to knock on the door and ask the current owner for permission. Even without the availability of traditional property details, purchasers still often choose to proceed with tax sales because properties are generally listed for far less than market value and there is still opportunity for a great investment.
Public Auction vs Public Tender
There are two different ways to conduct a tax sale, public auction or public tender. While over 90% of all tax sales in Ontario are conducted by public tender, it is up to the municipality treasurer to choose the method.
The process for a public auction tax sale is a pretty direct. An advertisement for the sale will contain a date, time, and location for the sale is published by the municipality. The property will have a minimum sale price called the Minimum Bid Amount and no bids below that amount can be accepted.
This type of auction is conducted out loud and if someone calls out a bid, someone else may immediately call out a higher bid. The person who has the highest bid will be required to immediately pay the full bid amount with the Land Transfer Tax, the Accumulated Taxes and HST (if any). The payment must be made by cash, money order or a check certified by a bank or trust company. Remember that a check from a credit union is unlikely to be accepted by the Municipality. You should always come prepared with a certified check for an amount higher than the total you would be comfortable spending because the municipality will probably be able to provide you with a check for the difference.
Unlike a tax sale by public auction, a tax sale by public tender is conducted in writing. Prospective buyers will submit FORM 7 TENDER TO PURCHASE which includes how much money you are interested in paying for the property. This is called your tender.
A tender must be submitted with a deposit in an amount equal to at least 20% of the tender amount stated on FORM 7. This amount must be paid by certified bank or trust check or by money order. Just as in a tax sale by public auction, a check from a credit union may be rejected. The Form 7 and the deposit are required to be submitted in an envelope that meets specific requirements including that it contain the property details and that it be sealed.
A tender needs to be received in a timely fashion. If a tender is not received on or before the date and time for the tender opening specified in the advertisement, it will be considered late and must therefore be rejected. Tenders received by a municipality will be kept in a safe place and unopened until shortly after the tender opening date and time. If you have submitted the highest tender, you will be informed by mail that you have 14 days in which to fulfill the purchase and provide the remainder of the amount due to complete it. If you fail to do so within the 14 day period, you will lose your deposit.
The most significant difference between tax sales by public auction and tax sales by public tender is the difference in ability to increase your offer in response to your competing buyers. In an auction, when someone calls out a bid, you have the opportunity to call out a higher bid if you wish. When you are making an offer by tender, after the time for accepting tenders has passed, you have no ability to increase your offer.
Completing Form 7 and the Tender Envelope
When submitting a valid tender, you are required to complete a FORM 7. It is an easy document to fill out and taxsaleshub.ca will include a FORM 7 with the property sale information as well as the information you must include on the tender envelope. We provide all the details and information you need so that your tender is not rejected for technical reasons.
Postponed Tax Sales
Municipal Tax Sale Rule No. 22 was amended in 2006 to allow the Municipality Treasurer to postpone an advertised tax sale if the Treasurer believes that the completion of the sale would be impractical or unfair to the tenderers or bidders involved. The rule requires that the sale must be rescheduled for a date within 90 days of the originally advertised sale date. If it is not rescheduled within this time frame, the tax arrears certificate registered on the title must be cancelled and the sale process must start again. When a tax sale is postponed this must be stated in the new tax sale ad.
A postponed sale is treated differently than a second listing of an unsuccessful sale. When an unsuccessful sale is re-advertised it does not need to state that it was previously advertised for tax sale and it may be re-advertised for sale within two years of the first sale.
Repeated Tax sales with a lower minimum tender or bid amount
As we discussed in the section on postponed tax sales, the Municipal Act of 2001, governing tax sales and procedures, was amended in 2006. The amendment allows a municipality to offer a property for sale again within two years of an unsuccessful sale.
The original sale may only take place after a property has been in arrears on its tax obligations for three years. The original Minimum Tender Amount is statutorily calculated and is equal to the outstanding taxes owed plus the costs of the sale. However, the rules allow the municipality to write off all or some part of the taxes if the first sale finds no purchaser and therefore when a property is offered for sale a second time, it is very likely that due to the write-off, the Minimum Tender Amount required in the second sale will be much lower than it was in the first.
We'll send weekly emails to our members with details about newly listed tax sales across Canada. Our properties search page will provide currently listed properties, as well as history of past tenders.
When a tender is submitted for the purchase of a tax sale property, there must be absolute compliance with the Municipal Tax Sales Rules and the Municipal Act. There are many reasons a tender might be rejected.