Tax Sale Rules in Canada

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If the property taxes go for one or two financial years uncleared, the Canadian government often takes up the property and resells it to interested buyers. The process of reselling delinquent properties is referred to as a tax sale and often involves a set of rules due to the fragility of the matter.

Learning the various rules connected to selling delinquent properties in Canada is important. This will free you from tax sale proceedings that aren’t legally approved or could land you in trouble.

The rules aren’t meant to discourage potential buyers but to ensure the best out of the process for both parties. That brings you to the discussion of today, which seeks to inform you about the rules surrounding tax sales in Canada.

Rule #1: Duration of Tax Arrears

This rule is directly concerned with the period during which the Canadian government can wait until a property is declared delinquent due to tax arrears.

Although it differs from province to province alongside other legal factors, such as the prevailing financial bill, many provinces in Canada offer a grace period of six months to two years until they initiate a tax sale.

During this period, the concerned department is bestowed with following up on the case with occasional reminders to the property owner regarding their tax arrears. A tax sale is initiated if the owner doesn’t comply within the period.

Rule #2: Public Notice

Another significant rule surrounding tax sales in Canada is the notice of sale. It’s illegal to initiate a tax sale without public notice or acknowledgment by the previous property owners or other concerned parties. Therefore, the government puts a public notice revealing an upcoming tax sale to interested buyers.

The notice can be posted on the municipal government website where the property is located, physically on the local government’s notice board, in the local newspaper, or at the actual property through a written sticker. You can also consult with Tax Sales Hub for more information.

Rule #3: Registration of Bidders

The above public notice for an upcoming tax sale means to attract potential customers into the procedure. It also comes with a well-outlined method of bidders’ registration through the website or at the local government offices.

The registration of bidders must state the requirements and deadline of the registration as stated in the tax sale rules. Potential buyers who fail to adhere to the stated credentials may not qualify as bidders, while in other Provinces, they may be exempted with a day or some hours.

Rule #4: Redemption Period

This tax sale rule focuses on the period within which the buyer can redeem their property, leading to the cancellation of a possible tax sale. It also depends on the property’s location. Many Canadian provinces declare the redemption period between three to six months.

During this period, the property owner can redeem the ownership by honouring the outstanding tax arrears alongside any penalties and costs connected to the property.

Rule #5: Auction Process

Among the many rules associated with tax sales in Canada is the auction process, which states how the process should be undertaken alongside its requirement. Every person interested in acquiring a tax sale property must adhere to the government’s auction rules and requirements.

Sometimes, the auction document may specify the payment method, while it’s stated during the bidding stage in other cases.

Rule #6: Eligibility of Properties

Unfortunately, not all properties with delinquent taxes automatically qualify for tax sales. The Canadian government states the criteria which must be followed to evaluate the eligibility of a particular delinquent property regarding tax sale.

Some essentials in this rule include the amount of tax arrears under discussion and the type of property alongside a few exceptions, such as government-owned properties. The county government must adhere to this rule before putting a delinquent property into a tax sale.

Rule #7: Tax Sale Surplus

The tax sale proceedings often outdo the outstanding costs, penalties, taxes, and other costs associated with the property, leading to a surplus. In this case, the Canadian government states that the extra funds should be divided among the concerned parties to ensure equity and fairness.

These parties include the previous owner of the property or mortgage holders. Any unclaimed tax sale surplus is left for the local government to undertake various administrative duties or public development.

Often, the municipality may not call the above parties to acquire the surplus but automatically reverse it as public funds.

Rule #8: Clearance of Title Deed

This rule explains how the highest bidder should acquire the property’s title deed after a successful tax sale. Clearing a tax sale title deed runs through various steps to ensure the buyer acquires a defect-free certificate. First, the local government confirms the completion of payment, followed by the required documents.

After that, the new owner acquires a tax sale certificate used to undertake a comprehensive title search for re-confirmation. Suppose the property is free from any tax areas alongside other legal attachments. In that case, the owner gets an updated title deed, and the ownership of the property is transferred to them successfully.

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