When property owners fail to honour their property taxes, the government may opt to put it on sale through tax sale. The approximate percentage of properties that undergo tax sales in Canada is 15% per year, varying in different provinces. Tax sale is a sensitive process involving various rules to uphold the rights of either party (property owner and government).
This post will discuss the tax sale rules to help you understand your responsibilities.
Rule #1: Only Applicable on Delinquent Properties
One of the prevalent tax sale rules is that they only apply to delinquent properties. This means that the government can only initiate a tax sale on delinquent taxes and not any other.
It could be vacant land or agricultural, commercial, and residential properties. Tax sales aim to cover unpaid taxes and any other applicable balances.
Rule #2: Notice to the Property Owner
Another rule of tax sales is that the government must offer a notice regarding a potential tax sale to the property owner. First, the government will notify you of your unpaid tax balances, followed by an upcoming tax sale notice.
The most common means of notification include online posting, public notices, or direct contact through email, SMS, or call. Other details in the notice include the date of the impending tax sale and any additional information concerning the property.
Rule #3: Redemption Period
The redemption period in tax sales is a statutory requirement that the government must honour. It involves providing the property owner with some period to redeem their property after it has been sold through tax sale. The current owner can reclaim their property by paying the outstanding taxes, accumulated interest, and other additional expenses.
Depending on the existing laws, the redemption period may vary from one province to another. Generally, it can be months or weeks, while others may take close to a year. Upon paying the outstanding arrears, the property owner may reclaim their property. Failure to do so within the stated period will cause the property owner to lose ownership.
Rule #4: Public Announcement and Auction
Another rule regarding tax sales is that an upcoming sale should be announced publicly to interested citizens. A public announcement regarding a forthcoming tax sale can be made through public notices, government websites, well-visible notices near the property, or mass emails.
This rule also applies to the auctions, which should be held publicly. During the auction, interested buyers bid, and the winner gets the property regardless of the background.
Rule #5: No Deep Information
Unlike standard sales, tax sales do not offer much information regarding the properties under discussion. The least information the government can offer is the location and street address of the property, the minimum bidding amount, and the deadline for receiving the applications from bidders.
Therefore, as a potential buyer, you should search for more details regarding the property through the land and property office or a realtor.
Rule #6: Inspection is Optional
Potential buyers of tax sale properties should acknowledge that inspection of the property is optional. Hence, as you plan to register as a bidder, you should understand that the government may fail to arrange a home or land inspection.
Simultaneously, the present property owner is not committed to letting in potential buyers for an inspection. Tax-sale properties are sold ‘as is,’ and you may not get an internal look into the property.
Rule #7: The Minimum Bid Must Be Maintained
The minimum bid to the tax sale must be maintained and not reduced. It’s arrived at by calculating the outstanding tax arrears, accrued interests, penalties, and additional tax sale costs.
Before registering for a tax sale, potential buyers should recognize that the minimum bid or tender should be maintained. Hence, if your possible bid goes below the statutory tender, it might be rejected or have you disqualified from the auction.
Rule #8: The Highest Bidder Acquires the Property
Another rule regarding tax sales is that the highest bidder during the auction wins the property. They must pay for delinquent taxes, accrued interests, and other additional costs.
However, when the highest bidder fails to pay for the property within the specified time, the position may be transferred to the subsequent winner. When the highest bidder wishes to proceed with the tax sale, they must pay a fixed deposit or the entire amount.
Rule #9: Title Deed Transfer
After paying the total tax sale amount, the government initiates the title deed transfer process. However, the highest bidder or buyer may not acquire the title deed soon after a tax sale but is first offered a certificate.
A tax sale certificate acts as proof of ownership and provides specific rights to the buyer as they wait for the title deed. The buyer should actively follow up on their title deed. Any excess proceeds from a tax sale may be offered to the previous property owner or retained by the government.
There you have it! The most popular rules of tax sales in Canada. Luckily, the rules have been outlined as you prepare to participate in the upcoming tax sales across your province. When you have more concerns and questions, you can seek the intervention of a tax sales professional or real estate agent for further guidance.