A tax sale in Canada is the sale of a property with unpaid property taxes done by the municipality to recover said taxes. These tax sales are guided by strict rules to ensure fair treatment of all parties involved while also ensuring the taxes and fees owing are recouped.

A tax sale is a quick way to purchase property though it does not always end up in homeownership. Here are a few of the primary tax sale rules in Canada.

Rule #1: Posting Tax Sale Homes

The province legislates tax sales. Each province has a defined set of requirements for the treasurer to advertise land for sale, ensuring that reasonable sale of notice is provided.

As an example, in Ontario, it is required that a tax sale is advertised once in the Ontario Gazette and once a week for four weeks in a newspaper within the local municipality.

Rule #2: Required Information for a Tax Sale

A tax sale is not required to provide in-depth information on a given property. The minimum requirement is the street address and the location of the land, the deadline for receiving tenders, and the minimum tender amount.

As a potential buyer, you must seek additional information on a given tax-sale home.

Rule #3: You Do Not Have a Right To Inspection

As a party who intends to bid on a tax sale home, you do not have any right to enter a property and arrange a home inspection for a home being sold at a tax sale.

The present homeowner is not obligated to let you in for an inspection. During tax sales, you buy property as-is and cannot trespass to gather further information on a home.

Rule #4: Mortgages Are Deleted From The Title

When there is a tax sale, and the tax deed is registered, all mortgages are deleted from the title, except if it’s a crown mortgage. A tax sale can deliver a property to a buyer free from all estates and interests.

However, any claim by the government, a crown corporation, or a similar government agency will remain on the title. Therefore, conducting a title search summary on any tax sale property before bidding is best.

Rule #5: Understanding The Minimum Bid Amount

The municipality sets the minimum bid amount or minimum tender amount. It calculates all outstanding taxes, penalties, interest, and tax sale costs. This is where offers on a tax sale are subject to begin. Any offer lower than the minimum amount will be rejected.

Rule #6: Public Tender Must Have a Deposit Amount

If you are making a bid on a tax sale property by public tender, your bid must be submitted with a minimum 20% deposit of the amount you are bidding. This can be done by money order, bank draft, or certified cheque.

The bid must be addressed to the treasurer, submitted in a sealed envelope, and indicated with a short property description for a tax sale.

Rule #7: Tenders Can Be Rejected For Rule-Breaking

If you submit a bid that is not equal to or greater than the minimum tender amount, does not comply with the municipality’s local rules, or if you request it to be withdrawn, a tender can be rejected by the municipality and voided.

When this occurs, the deposit is returned to the bidder, and a statement of the reason for rejection is provided.

Rule #8: Win a Tax Sale Home in Canada

The highest bid receives the tax sale home. At that time, the balance of the amount tendered, the accumulated taxes on the property, and any additional taxes that may be applicable must all be paid to the treasurer.

Suppose the highest bidder cannot fulfill payment obligations within the stipulated time. In that case, the tenderer’s deposit is forfeited to the municipality, and the treasurer can then offer the tax sale property to the next highest bidder.

Rule #9: Become Owner of a Tax Sale Home

After a successful bidder has provided payment in full and received it from the purchaser, the municipality then provides a tax deed registered on the title.

After that tax deed is registered, the highest bidder becomes the property owner. It is a fairly simple, quick, and efficient process without involving traditional lenders or lawyers unless requested by purchasers.

Rule #10: The Former Owner Can Redeem The Property

Until a tax deed is registered, the former owner can successfully redeem the property if they can pay the full taxes and other costs owed. However, after the tax deed is registered, any claim they have to the property is revoked.