Read this first
This page explains your options. It will not push you toward a form. If you have received a legal notice, speak to a lawyer or a Licensed Insolvency Trustee as well.
Who this is for: Homeowners who owe property taxes from a past year, or who received a letter from their municipality about arrears, and want to understand what comes next.
On this page
A letter about unpaid property taxes can feel like the start of a countdown. It is worth reading slowly, because tax sale systems are built around years of arrears, not weeks, and most give the owner a clear way to stop the process by paying. What follows is general information drawn from published provincial and municipal sources. It is not legal advice, and a lawyer can tell you what your own notices mean.
What property tax arrears mean
Property tax is a charge on the land that the municipality collects each year. If it goes unpaid, penalties and interest are added, and the balance becomes arrears. Unlike a credit card, a tax debt is attached to the property itself, so the municipality can use a legal process against the home if the arrears stay unpaid long enough.
Provinces set the rules, and municipalities carry them out. That is why a neighbour’s experience in another province may not match yours.
The timeline and rules, province by province
These three descriptions come from official or municipal sources. The other provinces have their own rules, and you will need to check with your municipality.
British Columbia. The province says delinquent taxes are any taxes still unpaid on December 31 two years after the year the tax was imposed. Those can be offered at the annual tax sale. The lowest price the property can sell for, called the upset price, adds the current year’s taxes, the prior year’s arrears, the delinquent taxes from two years back, penalties and interest on each, an extra 5% of all taxes, penalties and interest, and any Land Title Act fees. The owner then has one year from the day of the sale to redeem by paying the upset price, costs the purchaser incurred to maintain the property, taxes the purchaser advanced, and interest. If the owner does not redeem, title passes to the buyer, and the former owner may claim any surplus within nine months.
Alberta. Alberta Municipalities describes a list of parcels with arrears of more than one year, prepared by March 31 each year. The Registrar of Land Titles places a tax recovery notification on the title, and by August 1 notifies the owner and anyone with an interest. If the arrears are still unpaid by March 31 of the following year, the municipality must offer the land at public auction, which must be held no later than one year after the date in the Registrar’s letter. Public notice has to go out weeks ahead, and the owner must be notified at least four weeks before. If the land does not sell, the municipality has several options, including becoming the owner.
Ontario. Municipalities follow Part XI of the Municipal Act, 2001, and publish their own versions of the steps. One county describes it this way: taxes unpaid from two years earlier make a property eligible for a tax arrears certificate. The owner gets a registered letter and 30 days to pay in full, pay the older balance, or begin a two year payment plan. If none of that happens, the certificate is registered, after which only full payment of the current balance is accepted. Interested parties such as a mortgage lender are notified, a final notice follows 280 days after registration, and the owner has one year from registration to pay the cancellation price before the property is advertised for sale by tender. Once a tax deed is registered, payment is no longer accepted. That is one county’s description, so check the one that applies to you.
Timelines are long, and the cost climbs along the way. Fees are added at several steps, so a debt that looked manageable can grow.
What you can do now
Call the municipal tax office and ask four things: the exact balance today, what it will be on the date a given step happens, whether a payment plan is available, and the date of the next legal step. Ask for the answers in writing.
Then work out where the money can come from. A payment plan comes first because it costs nothing extra beyond the penalties already set. A short term plan with the municipality is usually cheaper than borrowing. If the arrears are large, a lump sum from savings, a family loan with written terms, or selling a non-essential asset can clear them.
Who to speak to first
A lawyer, if you have received a certificate, a notice of auction or a notice that mentions a deadline. They can check that the municipality followed the rules in your province and tell you what happens to your mortgage and to anyone else with a claim on the title.
If property tax is one of several debts you are behind on, a Licensed Insolvency Trustee or a non-profit credit counsellor can help you see the whole picture. The Financial Consumer Agency of Canada says that talking to a credit counsellor will not affect your credit score, and that trustees can advise on consumer proposals and bankruptcy. Ask whether tax arrears on the home would be included in any plan before you rely on it.
Your mortgage lender matters here too. A lender with a mortgage on the home has a stake in the taxes being paid. Tell them early, and ask what they would accept.
The ways this can end
Most cases end in one of four ways. The owner pays in full. The owner agrees a payment plan and keeps to it. The owner sells the home and the taxes are paid from the proceeds. Or the municipality completes the tax sale and the owner loses title, with any surplus returned under local rules. The last is rare and avoidable, and it only comes after many warnings.
Where a second mortgage fits, and where it does not
A second mortgage is a loan registered behind your first mortgage. The Financial Consumer Agency of Canada says lenders usually lend up to 80% of the appraised value minus your mortgage balance, rates are usually higher than a first mortgage, and your home is the security.
It can fit when the arrears are a one-time problem, the income is back, and a municipal plan is not available or the deadline is too close. The worked example above shows the weakness: after fees, a $10,000 loan against $8,100 of arrears leaves $350, and you now pay interest too. It does not fit when you cannot afford the next tax bill, since the loan fixes last year but not next year.
Ask a licensed mortgage professional for the cost in dollars, the term, and how you would repay. Test it first with the calculator.
What not to do
Do not wait for the final notice. Do not ignore a registered letter because it looks like a flyer. Do not borrow from anyone who asks for a large fee before the money arrives. And do not assume a year of silence has made the problem go away, since the dates in your notice and in provincial rules are the ones that count.
If a loan is on your list and you want to speak to a licensed mortgage professional in your province, you can check your options. It is a request, and you can say no.
Paying off two years of tax arrears with a $10,000 interest only loan
Made-up figures. Property tax is $3,600 a year and two years are unpaid. The municipality adds an assumed $900 in penalties, interest and fees. The second mortgage is interest only at an assumed 12%, with an assumed 2% lender fee, 1.5% broker fee and $1,200 for legal, appraisal and title.
- Two years of unpaid tax
- $7,200
- Penalties, interest and fees
- $900
- Total owed to the municipality
- $8,100
- Loan fees
- $1,550
- Interest on $10,000 for a year
- $1,200
- Cash left after paying the municipality and fees
- $350
2 x $3,600
$200 lender, $150 broker, $1,200 legal and other
$100 a month
Questions people ask
How many years of unpaid property tax before a tax sale?
It depends on the province. In British Columbia the province defines delinquent taxes as those unpaid on December 31 two years after the year imposed. Alberta starts with arrears of more than one year, and an Ontario county describes eligibility after taxes remain unpaid from two years earlier.
Can I still pay after a tax sale notice arrives?
Yes, in the systems described here. Alberta's process lets the owner pay arrears before the auction, and a county in Ontario says the cancellation price must be paid within a year of registration. The amount grows with fees, so ask the municipality for an up to date figure.
Do I lose my house if it sells for more than I owe in taxes?
British Columbia says a former owner may claim any surplus from a tax sale within nine months. Surplus rules differ elsewhere. Ask a lawyer how it works in your province and what happens to other claims on the title.
Can a municipality set up a payment plan on tax arrears?
Many offer one before a tax sale process begins. One Ontario county offers a two year payment plan at the stage when a property becomes eligible for tax sale. Ask your municipality what it offers and by when you must apply.
Does my mortgage lender care that I owe property taxes?
Your mortgage agreement may require you to keep taxes current, so unpaid tax can be a separate problem with the lender. Read your agreement and ask the lender whether it pays taxes for you or only requires proof.