Crown interests on property may include Business Development Bank of Canada mortgages liens for arrears of income tax or HST remittances among many others.
The Ultimate Guide to Ontario Tax Sales (2022)
If you're a real estate investor who's looking to buy below market value, you need to know about Ontario tax sales. In this ultimate guide, we'll show you everything you need to know to get started in the exciting world of tax sales!
Truth be told, tax sales in Ontario have insane profit potential and have brought big breaks for investors in Ontario and elsewhere. But you still need a thorough understanding of the process and a solid and time-tested approach for your big wins.
What Is Tax Sale?
Homeowners who fail to pay their property taxes are at risk of losing their homes to a tax sale in Ontario. Wikipedia simply defined tax sale as the forced sale of a real estate property by a government entity for unpaid taxes by the property owner.
Every property in Canada is subject to property tax, and as a property owner, you're expected to pay what's due every year. If you fail to pay this, the property will become "tax delinquent". This starts a path that may eventually lead to a tax sale. In Ontario, properties that incur three years' tax arrears are listed as tax sales.
How Tax Sales Are Conducted
There are two ways to conduct a tax sale, either by public auction or public tender.
Every tax sale is governed by the Municipal Act, 2001, and the Municipal Tax Sales Rules made under that Act. The successful purchaser will be required to pay the amount tendered plus accumulated taxes and any taxes that may be applicable, such as a relevant land transfer tax and HST.
Over 99% of Ontario tax sales are conducted by public tender. A tender is a written document that informs a municipality of the amount you are offering to purchase the property.
Auctions should be attended in person. Cash, money order, bank draft, and cheques issued by a bank or trust corporation are all acceptable forms of payment.
Advantages of Purchasing Tax Sale Properties
The advantage of buying a property at tax sale is the ability to acquire a property for a fraction of the market value. Municipalities conducting tax sales need to recoup the amount of taxes owed plus interest and penalties and the costs involved in conducting the tax sale but nothing beyond this. As a result, the Minimum Tender Amount or Minimum Bid Amount is frequently much lower than an average buyer would expect to see on the market.
We'll show you a measurable story of how profitable tax sale results could be in this example.
In 2018, the Windsor township listed a tax sale property. The listing came with a minimum tender amount of $24,144.09. By the time the tax sale had been released, the property's assessed value was approximately $85,500.00. A few weeks after the tax sale listing was released, the property sold for $33,500.00 to the highest bidder. The fortunate buyer had made a profit of $52,000 in less than a month.
This insane profit margin will entice anyone.
But tax sales in Ontario still require a great deal of caution, experience, and understanding. While there are a lot of hero stories of investors landing big wins in this niche, we've also had horror stories of investors who had bought a lemon disguised as a bargain. It's up to you to arm yourself with all of the knowledge and experiences you'll need, and the latter parts guide will help with that.
Purchasing Tax Sale Property In Ontario
Public tenders are expected to be submitted by bidders in sealed envelopes, in person, via mail, or by courier.
Since the tax sale is a public event, others will likely be submitting tenders. The person with the highest tender will be permitted to purchase the property. If they choose not to do so, the second-highest tenderer will be permitted to purchase the property. No one else will be given the opportunity to make the purchase.
Form 7 - tender to purchase
You'll need to complete Form 7 to make your tender offer. This form contains important details such as your name, address, and tender amount.
Every active tax sale property listed on our website is accompanied by the documents package you need to submit the tender. The documents package includes pre-filled Form 7 as an interactive PDF, so all you have to do is fill up your information, sign it, and put it in a tender envelope.
When you make your tender, it must be sent with a deposit of at least twenty percent of the total tender amount. As an example, if your tender offer is $100,000.00, you must send it with a deposit of $20,000.00 or more. Anything less than 20% will be rejected. Please also note that your deposit must be made by money order, bank draft, certified bank, or trust corporation check.
When you submit your Tender, it must be sealed in an envelope on which a description of the property must be written or an address for the land specific enough to allow the treasurer to identify the property for which you are tendering. The tender envelope is also available in the documents package, which you can print and stick to the envelope. However, we highly recommend checking the municipality website to ensure the treasurer's name is correct.
Submit your tender on time
Your tender must be received by the date and time indicated in the tax sale listings. If your tender is not received by that time, the municipality will reject it.
Your Success Depends on Due Diligence
Some tax sale properties may have mortgages, liens, and executions that still remain valid, even after a tax sale in Ontario.
This means that some of these may still affect the property even after the sale. Any applicable lien, as well as other interests in favor of the Crown, may still be tied to the property after the sale.
Crown interests can range from the income tax and the retail sales tax act to the Canada Revenue Agency, Ministry of Finance, and the Business Development Bank, among others.
Even after the ownership changes, judgments in favor of the Crown are still attached to the property. If the previous owner owes anything, this debt is automatically transferred to you. This is why most people try to get an execution search to differentiate tax sale houses with true potential from ones that would become sinkholes.
Why is a title search important?
If you want to be sure where things stand, you'll be better off with a title search report. This request will help you access advanced information so you know what interests, liens, and executions may be tied to tax sales houses you may want to buy. Of course, this will help you determine if the purchase is worth it to begin with.
The title search report provides access to relevant information that may affect the property after tax sale deed. It will show you all the available records on the title documented in the Land Registry Office.
You can open Google Maps and use a street mode feature to look closer, but sometimes Google Street View will have deprecated pictures that may be about a couple of years old.
But when it comes to tax sales in Ontario and real estate transactions, these generally tend to fall short. Before you start planning on a tax sale property with a price that seems too good to be true, you have to be sure everything is in order.
Once you've done a title search report and there's still no problem, the next thing would be to visually inspect the property. This will help you gain firsthand knowledge of the issues that may come with buying the property. For instance, if there is a house on the property, we'd recommend a visual inspection.
IMPORTANT: You don't have the right to enter a tax sale property until you own it. However, you can view the property from the road or sidewalk or from a body of water if such property is a waterfront property.
Find Tax Sales Properties in Your Area
Tax Sales Hub is the first Canadian tax sales listing and your one-stop destination for everything about tax sales in Ontario.
Whether you're searching for cheap vacant land for sale or tax sale houses, you can always find information here about every currently available property, tax sale results, and other information about the most recent version of tax sale regulations (Municipal Act).
We offer updates in the form of weekly emails with a list of properties for sale in Ontario or provinces of your choice. Tax Sales Hub members are armed with detailed information about every property, such as: valuable tax sale tips to avoid rejection rejections and possible pitfalls, as well as a tender document package with every necessary document included. Moreover, all members are also eligible for up to a 50% discount on Title Search Reports.
Tax sales are an excellent way to buy real estate below market value, but it's important to remember that due diligence is key. Make sure to do your research before making any offers, and if you have any questions, don't hesitate to reach out to us for help.
If you're interested in learning more about tax sales in Ontario, join us today. We have tons of information to help you get started, including tips for due diligence and a guide to the process. We also have a list of upcoming tax sale listings, including vacant land, farmland, houses/cottages, commercial/industrial, and other types of properties.
Get to know what is accumulated taxes, Crown interest, title search report, execution search report, land transfer tax, municipality, and etc.
The municipality Treasurer will open the sealed Tender Envelopes in a place open to the public, as soon as possible after the last date and time for receiving tenders has passed.