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What is a tax sale?

what is a tax sale

A tax sale is the sale of a property conducting by a municipality in order to obtain unpaid property taxes. When a property has been listed for tax sale, it must have been in arrears for at least 3 or more years.

Advantages of tax sale purchases

What is the advantage of buying a property at a tax sale?

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 owed plus interest and penalties as well as their costs involved in conducting the tax sale but nothing beyond this. As a result, the Minimum Tender Amount or Minimum Bid Amount is very often much less than an ordinary buyer would look for in a market transaction.

Mortgages on tax sale properties

All mortgages or interests against property are eliminated after a tax sale other than those in favor of the "Crown". The "Crown" means the government of Canada, or Ontario, or any other province, or one of their crown corporations or agencies.

Tax sales are conducted in two ways

There are two ways to conduct a tax sale, either by public auction or by public tender. Over 90% of tax sales in Ontario 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. At this time, Tax Sales Hub only provides information about public tenders but we have plans to add public auction information in the future.

The "Minimum Tender Amount"

A Minimum Tender Amount is the amount for which a property is being sold to recoup tax arrears by a municipality through public tender. The minimum tender amount is calculated by totaling the outstanding taxes due plus penalties and interest as well as the municipality’s costs associated with the tax sale.

Is the minimum tender amount the purchase price?

The Minimum Tender Amount is merely the smallest amount the municipality is permitted to accept for the sale of a property. Any amount below the minimum tender amount must be rejected by the municipality and the person who submits the highest tender amount above the minimum tender will be permitted to purchase the property.

When does the highest tenderer become the owner?

Soon after the municipality has received the full purchase amount from the purchaser, including the Land Transfer Tax, Accumulated Taxes and HST (if applicable), a tax deed will be registered on title at the local land registry office and the purchaser becomes the new owner.

Former owners

Once a tax deed has been registered the former owner has no recourse on the property. However, at any time before the tax deed is registered, the owner may be permitted to recover control of the property and put a stop to the tax sale by paying the full amount of taxes and other costs to the municipality.

Do I get a clear title?

A tax deed will not necessarily give you a clear title to a property. Some properties sold by tax sale might continue to be subject to interests in favor of the Crown or Ontario or other province. An example of such a right would be a mortgage in favor of the Business Development Bank, or a lien or execution in favor of the Canada Revenue Agency. It is also possible that a tax sale property will be subject to interests such as easements, restrictive covenants, and adverse possession.

Environmentally contaminated properties

When purchasing a property that is environmentally contaminated, you have purchased a property that has polluted land. This might mean that the property was previously used as a gas station or for some other industrial use. If you suspect that a property might be contaminated you should be sure to view the property before submitting a tender offer. If you choose to submit a tender despite these suspicions, you will want to make sure you have the expertise and the funding to conduct such a clean up as it could costs thousands if not millions of dollars and you, as the new owner, will be held legally responsible for satisfying all of the requirements of the clean-up.

Properties subject to Crown interests

If you purchase a property with an interest in favor of the Crown, the Crown could seize the property and sell it to satisfy its interest if you do not pay the Crown. As an example, if you purchase a property that was subject to a mortgage in favor of the Business Development Bank, a Crown corporation, and do not repay the interest, they may take possession of your newly acquired property and sell it out from under you to satisfy the mortgage.

Determining if a property is subject to a Crown Interest

Before submitting a tender you should obtain a title search report and an execution search report against the property in question.

Where do I get a title search report and execution search report?

If you are seriously interested in purchasing a particular property at tax sale, you should obtain a title search report and an execution search report from taxsaleshub.ca website. Our services will provide these searches for you with a plain english summary showing any interests in the property that will remain in place after the tax sale as well as how much money would be owed as a result. It is also possible to obtain these reports from the land registry office in the county or region in which the property is located or to hire a lawyer or title searcher to obtain them for you.

Can I have the house inspected prior to purchase?

When purchasing a property at tax sale, you are agreeing to an "as is" purchase. You have no right to enter the property prior to the sale and the current owner is not obligated to permit you to have it inspected.

What if the house is not vacant?

A municipality has no obligation to provide you with a vacant property at tax sale and therefore it is very possible to acquire an already occupied property. If you wish to evict those living on the land, you may choose to hire a bailiff or a lawyer to handle the eviction process.

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