What Is A Tax Sale

Serving Tax Sales Investors Since 2005

What is a tax sale?

A tax sale is the sale of one or more properties by a municipality to recover unpaid property taxes on those properties.

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

Tax sale properties can often be bought at prices far below market value. This is because a municipality does not have to obtain market value for these properties. They only have to obtain the amount of taxes owing (including interest and penalties), plus their costs in conducting the tax sale.

Are there mortgages on tax sale properties?

When a property is sold at tax sale, any mortgages registered on title are eliminated, except for mortgages in favour of the “Crown”. The “Crown” meaning the Government of Ontario or the Government of Canada, or one of their agencies or crown corporations.

When the tax deed is registered, the mortgages (except those of the Crown – Federal or Provincial) are deleted from title by the land registry office. So BMO, Royal Bank, CIBC, TD, Scotia Bank, Credit Union, etc., mortgages are deleted.

The reason they are deleted: Anyone with an interest on title is sent a notice from the Town that the property is in tax arrears. When the bank receives the notice they now have the option of paying the tax arrears. If they pay the taxes – they get a lien on title for the amount they paid and the Town cancels the tax arrears certificate. This way the bank preserves its interest on title.

If the bank chooses not to pay the taxes – their interest (the mortgage) is deleted from title when the tax deed is registered.

If there are Crown interests, they remain, which will make it difficult to sell. Also, the Crown can seize the property at any time and sell it to recover what is owed to them.

Here is Section 379(7) of the Municipal Act, 2001. It says “free from all estates and interests” and banks are not listed as an exception.

Effect of conveyance

(7) A tax deed, when registered, vests in the person named in it, an estate in fee simple in the land, together with all rights, privileges and appurtenances and free from all estates and interests, except,

(a)  easements and restrictive covenants that run with the land;

(b)  any estates and interests of the Crown in right of Canada or in right of Ontario, other than an estate or interest in land that,

(i)  is vested in the Crown in right of Ontario because of an escheat or forfeiture as a result of the dissolution of a corporation, or

(ii)  belongs to the Crown in right of Ontario as a result of the death of an individual who did not have any lawful heirs;

(c)  any interest or title acquired by adverse possession by abutting landowners before the registration of the tax deed.  2001, c. 25, s. 379 (7); 2006, c. 32, Sched. A, s. 156 (3); 2015, c. 38, Sched. 7, s. 53 (6); 2017, c. 10, Sched. 1, s. 62 (5).

Are there liens on tax sale properties?

When a property is sold at tax sale, any liens registered on title are eliminated, except for liens in favour of the “Crown”. The “Crown” meaning the Government of Ontario or the Government of Canada, or one of their agencies or crown corporations.

When the tax deed is registered, any lien(s) (except those of the Crown – Federal or Provincial) are deleted from title by the land registry office. 

Lien examples: Construction Lien, Mechanics Lien, The Law Society of Upper Canada,  Legal Aid Ontario

The reason they are deleted: Anyone with an interest on title is sent a notice from the Town that the property is in tax arrears. When the lien holder receives the notice they now have the option of paying the tax arrears. If they pay the taxes – they get a lien on title for the amount they paid and the Town cancels the tax arrears certificate. This way the lien holder preserves their interest on title.

If the liens holder chooses not to pay the taxes – their interest (the lien) is deleted from title when the tax deed is registered.

If there are Crown interests, they remain, which will make it difficult to sell. Also, the Crown can seize the property at any time and sell it to recover what is owed to them.

Here is Section 379(7) of the Municipal Act, 2001. It says “free from all estates and interests” and lien holders are not listed as an exception.

Effect of conveyance

(7) A tax deed, when registered, vests in the person named in it an estate in fee simple in the land, together with all rights, privileges and appurtenances and free from all estates and interests, except,

(a)  easements and restrictive covenants that run with the land;

(b)  any estates and interests of the Crown in right of Canada or in right of Ontario, other than an estate or interest in land that,

(i)  is vested in the Crown in right of Ontario because of an escheat or forfeiture as a result of the dissolution of a corporation, or

(ii)  belongs to the Crown in right of Ontario as a result of the death of an individual who did not have any lawful heirs;

(c)  any interest or title acquired by adverse possession by abutting landowners before the registration of the tax deed.  2001, c. 25, s. 379 (7); 2006, c. 32, Sched. A, s. 156 (3); 2015, c. 38, Sched. 7, s. 53 (6); 2017, c. 10, Sched. 1, s. 62 (5).

How are tax sales conducted?

Tax sales are conducted either by public auction or by public tender (a tender is a written document that advises the treasurer how much you will pay for the property). The vast majority of tax sales in Ontario are done by way of public tender.

“Minimum Tender Amount” or “Minimum Bid Amount”

This is the minimum amount that the municipality must receive in order to sell the property. This amount is the total of the outstanding taxes, penalty, interest, and the municipality’s costs in conducting the tax sale procedures. “Minimum Tender Amount” refers to a property that is being sold by public tender. “Minimum Bid Amount” refers to a property that is being sold by public auction.

Can I buy a property for the Minimum Tender Amount or Minimum Bid Amount?

Not necessarily. The person who submits the highest tender or bid will be permitted to buy the property. The Minimum Tender Amount or Minimum Bid Amount is simply the lowest amount that the municipality is allowed to accept. Any tender or bid that is received for less than that amount must be rejected by the municipality.

When does the highest bidder or tenderer become the owner of the property?

Shortly after receiving payment in full from the purchaser (including Land Transfer Tax, Accumulated Taxes, and if applicable, HST) the municipality will have a “tax deed” registered on title. As soon as a tax deed has been registered the purchaser becomes the owner of the property.

Can the former owner redeem a property?

After a tax deed has been registered the former owner cannot redeem the property. However, before a tax deed is registered, the owner might be able to redeem the property by paying the full amount of taxes and other costs to the municipality, thereby stopping the tax sale.

Will a tax deed give me clear title to a property?

Not necessarily. After a tax sale, properties are subject to any interests in favour of the Crown in right of Ontario or Canada. Some examples of such interests are a mortgage in favour of the Business Development Bank or a lien or ‘execution’ in favour of Canada Revenue Agency. Tax sale properties may also be subject to other interests such as ‘easements’, ‘restrictive covenants’ and ‘adverse possession’.

What happens if I buy a property that is “environmentally contaminated”?

“Environmentally contaminated” lands are lands that are in some way polluted. Among the most common types of environmentally contaminated lands are properties that have been used for a gas station or for some type of industrial use.

If you buy an environmentally contaminated property you could be held legally liable for the cost of an environmental clean up. Such a clean up could potentially cost thousands or even millions of dollars.

You should not buy an environmentally contaminated property unless you have the expertise and the funding to have a clean up done that will satisfy all legal requirements.

In order to guard against buying an environmentally contaminated property it is advisable to view a property before submitting a tender or a bid. If you suspect that a property may be contaminated it is best to not submit a tender or a bid unless you are willing and able to have an environmental clean up done. Again, keep in mind that a clean up could cost thousands or millions of dollars, and you could be held legally liable.

What happens if I buy a property that is subject to an interest in favour of the crown?

You will be responsible to pay whatever money is owing to the Crown as a result of that interest. If you do not pay that money the Crown could seize the property that you just bought and sell it. For example, if you bought a property that was subject to a mortgage in favour of Business Development Bank, which is a Crown Corporation and therefore creates an interest in favour of the Crown, you would have to pay that mortgage. If you failed to do so the Business Development Bank could seize the property and sell it.

How can I find out if a property will be subject to any such interests before I submit a bid or tender?

It will be necessary to obtain both a title search against the property and an ‘execution search’ against the owner(s) of the property. A “Title Search Summary” ordered through our website (Ontariotaxsales.ca) includes a search of the property (parcel register) and an execution search of the owner(s).

How can I obtain a title search and an execution search?

If you are a GOLD Member you can obtain these searches for most tax sale properties from this website. Our searches come with a summary in plain English, not legal jargon. The summary will show if anyone will have an interest in the property after the tax sale, and how much money will be owed as a result of that interest as of the date that interest was registered.

Anyone can order a title search for our Featured listings.

Members get 50% off the regular price of a title search summary and a title search update and can order title searches for both Featured and Members Only listings.

Unfortunately if the property is in the old Land Registry system (the PIN ends with an “R”), we will not offer a title search through our website as complete title information is not available to us online.

If you prefer, you can go to the land registry office in the county or region where the property in question is located and conduct the searches yourself. Or you can hire a lawyer or title searcher to conduct the searches for you.

Can I inspect a house that is being sold at a tax sale?

You do not have a right to enter onto a property that is being sold at tax sale. The person who owns the property is not obligated to allow people to inspect the house or the property. When you buy a property at a tax sale, you take it “as is”. There are no warranties of any kind.

You can view the property from the road. If you venture onto the property you will be trespassing.

What happens if I buy a house and there are people living in it?

It will be up to you to decide what to do. Please note that the municipality is not obligated 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.

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. Please click on the links below for step-by-step instructions on buying properties at a tax sale.

Tax Sales by Public Tender

Tax Sales by Public Auction

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Tax Sales Results

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