Real Estate

What happens if you don't pay property taxes in Ontario?

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Jul 5, 2004
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While I doubt the bank will just up and pay any taxes owing without the municipality first taking legal action, I don't doubt that the bank will get involved to protect their investment. They're not going to just let the city seize the house to pay off back taxes, especially when taxes owed are likely a lot less than the mortgage amount remaining. The argument seems to be at what point does the bank get involved, and it probably varies from one case to the next.
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Jan 19, 2011
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Mark77 wrote: No they are not. As other posters have noted.


An equal number of posters, myself included, with personal experience have claimed the opposite.

If your position actually is correct, why then did my banks not step in and pay my tax arrrears?. Four occasions, four opportunites, I resolved the arrears myself, with no involvement from my mortgage holder. My anectodotal experience illlustrates your claim that banks do pay municipal arrears is factually incorrect.


Mark77 wrote: Did you have a very substantial equity cushion? Did they go so far as to register a lien?


On one property yes, the other no, that didn't seem to make a difference. What does that matter anyway, as you simply claim banks step in and pay tax arrears, and not that they pay tax arrears conditionally, dependant on the substantiveness of a homeowners 'equity cushion'?


Mark77 wrote: Yeah probably a low ratio mortgage you had on such, where there was no particular reason for the lender to worry about subordination of their security interest.
None of the mortgages were high ratio, however had the houses gone to tax sale, the mortgage companies would have lost 60k and 250k in the first go around, and 40k and 220k respectively the second time. Your assumption above is incorrect as well, both lenders did have to worry about subordination of their interest, which was substantial, and far greater than the taxes. Once again your point is rather moot here, as your claim was that banks paid tax arrears on behalf of delinquent homeowners, and did not make your statement conditional on whether the lender was worried (or not) about subordination of their security interest.

My personal experience, as the owner of multiple properties, over at least three decades, is pretty clear and does not support your position that banks as a matter of course step in and pay outstanding property tax bills. It is a possibility that they may step in and prevent a property from going up for sale to recoup tax arrears, but your initial blanket statement, that had no conditions, is clearly not something a member here should actually rely on.
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May 17, 2007
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fieldhousehandyman wrote: An equal number of posters, myself included, with personal experience have claimed the opposite.

If your position is not correct, why then did my banks not step in and pay my tax arrrears. Four occasions, four chances, I resolved the arrears myself. My anectodotal experience illlustrates your claim that banks do pay municipal arrears is factually incorrect.

None of the mortgages were high ratio, however had the houses gone to tax sale, the mortgage companies would have lost 60k and 250k in the first go around, and 40k and 220k respectively the second time. Your assumption above is incorrect as well, both lenders did have to worry about subordination of their interest, which was substantial, and far greater than the taxes

My personal experience, as the owner of multiple properties, over at least three decades, is pretty clear and does not support your position that banks as a matter of course step in and pay outstanding property tax bills. It is a possibility that they may step in and prevent a property from going up for sale to recoup tax arrears, but your initial blanket statement, that had no conditions, is clearly not something a member here should actually rely on.


I hate to say this, but you're a perfect example of someone who NEEDS the taxes added to the mortgage payment. Can you share with us why you happened to get so far behind on 4 occasions? Were they rental properties and you were running cash flow negative? Or was it just procrastination? I can imagine it's stressful to have to make up such a large amount while trying to also stay current!
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Jan 19, 2011
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jacksorbetta wrote: I hate to say this, but you're a perfect example of someone who NEEDS the taxes added to the mortgage payment. Can you share with us why you happened to get so far behind on 4 occasions? Were they rental properties and you were running cash flow negative? Or was it just procrastination? I can imagine it's stressful to have to make up such a large amount while trying to also stay current!
One answer! Kids!

With the subsequent substantial reduction of the main wage earners income.

I don't hate at all you made that embarrassing statement, but you made an assumption, that I am an example of someone who need the taxes added to our mortgage payment! tsk tsk tsk! You do know what assumptions do?

I could go into a lot of specific detail, but basically one kid arrived, spouses gross income went from 70k to 18k for 9 months, and second kid arrived five years later, her income went from 90k to 20k for 11 months.

The math should not be difficult to sort out why we eventually ended up 3 years behind on taxes!
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Jan 2, 2012
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Mark77 wrote: No they are not. As other posters have noted.

Mark the reason your statement was wrong is that you made it an absolute. You stated simply the banks in Ontario will pay your overdue taxes as a fact, when that is clearly not the case.

The fact is in mortgages in Ontario where the home owner is paying their own taxes, the banks may pay your taxes in arrears, only if they are allowed to do so based on the specifics in the mortgage contract, if they are even aware of the tax situation, and in the end most likely will not get involved unless the city goes so far as to put a lien or legal claim on the property.

So in the vast majority of cases the banks won't get involved if you are simply overdue and no liens/legal proceedings are involved yet.
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May 17, 2007
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fieldhousehandyman wrote: One answer! Kids!

With the subsequent substantial reduction of the main wage earners income.

you also made an assumption, that I am an example of someone who need the taxes added to our mortgage payment! tsk tsk tsk! You do know what assumptions do?
Ok, I'll correct what I said earlier. AT THE TIME you were behind, monthly tax installments may have benefitted you?

Obviously you've got a handle on it now :)

One thing I didn't say was how I advised my neighbors. I showed them the provincial program for deferring taxes as a family with dependant children. They had no idea it existed. they were able to pay only the utility portion of the current year while deferring the actual property taxes, and I suggested they use their line of credit to pay up their arrears. It was an easier financial option for them, rather than paying $1100 more monthly to catch up.
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Jan 19, 2011
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LOL!

yep, at the time, we probably would have benefited from monthly installments, I agree.

It is what it is, was what it was. There were some debts that were more important, and more costly, that had to be reigned in or managed.

One benefit, back to the OP, is that municipal taxes are generally not reported to credit bureaus, or at least in my wifes case, never showed up on hers, so if it a question of keeping current on a debt that reports, versus a debt that does not, keep the debt that reports in good standing.
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
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Jan 27, 2007
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Ok - I work in a Municipal finance department in a fairly senior role so I think I can speak to this issue at least in Ontario. Im not sure if it is different in Moose Jaw or Calgary, wherever MarkyMark is from.

I have NEVER known a bank to unilaterally pay Property taxes on behalf of a homeowner. Homeowners can (not must) CHOOSE to pay p.tax to the bank which will then make a payment to the Muni. As far as I am aware a bank cannot force a homeowner to pay p.tax through the bank although some banks present it as such.

So Mark unless you can provide concrete documented PROOF by qouting some legislation or contract please STFU about this issue.

In times when the p.tax gets very far in arrears, the muni will get the money when the house is sold. Lawyers are bound to check ptax records with a muni before completing a deal. A muni can also go the tax sale route but that is rare. If the property tax is above the value that the property brings at tax sale, the Municipality funds the difference.
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Jul 3, 2011
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As an FYI, in Ontario under the Municipal Act (presumably all provinces have a similar statute), before a property tax deed (lien) is placed on a property, the city/town must have registered a tax arrears certificate at least one year previously and advise all interested parties who would be the owner(s) and holders of other registered encumbrances of same and allow them to clear the arrears in full. This is how a mortgagee who is not responsible for remitting the tax directly will find out about the default.

In such an instance, the mortgagee or any lien holder for that matter, would most definitely invoke their given right to pay the taxes because once the city/town seizes the property to sell it, the mortgage and all other encumbrances are eliminated meaning the mortgagee is out of luck.

The entire process from default to sale is approximately at a minimum 4 years.
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Nov 19, 2004
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CSK'sMom wrote: Several different lenders... From TD and Scotia to National Bank. Banks are protecting themselves in this area now after the recession resulting in lots of foreclosures and tax liens.
Really? No lender, including scotiabank has ever required that they pay the taxes in our mortgages. Yes, they pressure you to set it up that way because they get to hold your money, but never has it been a requirement.
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May 17, 2007
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don242 wrote: Really? No lender, including scotiabank has ever required that they pay the taxes in our mortgages. Yes, they pressure you to set it up that way because they get to hold your money, but never has it been a requirement.
Things are changing in the mortgage industry. Lending has tightened up so much, that should the bank or broker have trouble getting you insured by Cmhc or Genworth, it might be a condition of financing that you remit tax payment through your mortgage. there are a lot of slightly shaky mortgage holders out there-the increasing rate of foreclosures points to it. In my townhouse complex, we currently have 3. No doubt the taxes are behind, seeing as their strata fees havent' been paid in over a year. And our complex was build in 2010.
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Jan 19, 2011
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CheapFinds wrote: Is it the same as a 15%/yr* interest rate loan, but it doesn't go in your credit report, so it doesn't affect your credit rating?
Short answer to this is yes, and from personal experience, being delinquent (late, up to three years even) on a municipal tax bill does not appear on ones credit report.

To be honest, If you are looking at paying credit card interest rates on a modest balance (up to 5 or 10k max, for example) it is actually a smart idea to discontinue paying ones property tax, throwing all available funds at the high interest debt to clear it up, and then getting back to the municipal tax debt to pay it back.

Been there, done that (as my two prior posts intimate)!
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
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Jan 27, 2007
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licenced wrote: As an FYI, in Ontario under the Municipal Act (presumably all provinces have a similar statute), before a property tax deed (lien) is placed on a property, the city/town must have registered a tax arrears certificate at least one year previously and advise all interested parties who would be the owner(s) and holders of other registered encumbrances of same and allow them to clear the arrears in full. This is how a mortgagee who is not responsible for remitting the tax directly will find out about the default.

In such an instance, the mortgagee or any lien holder for that matter, would most definitely invoke their given right to pay the taxes because once the city/town seizes the property to sell it, the mortgage and all other encumbrances are eliminated meaning the mortgagee is out of luck.

The entire process from default to sale is approximately at a minimum 4 years.
You are referring to the tax sale process which is exceendingly rare. Yes, where a property goes to tax sale generally there are last minute arrangements with the property owner and lender which usually results in the taxes being paid off in full before the tax sale peocess continues. However that process is never unilateral on the part of the lender. It usually is the result of a mortgage refinance which is agreed on by the property owner and bank. A bank will not swoop in and save the day for a homeowner by paying property tax. There is no way a bank can unilaterally increase a loan balance on a mortgager. Ive never seen a clause in a standard mortgage agreement that allows a bank.to.do.that. Maybe Ive just seen bank docs that dont have that clause in it.
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Jan 27, 2007
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Also what givrs the bank this GIVEN RIGHT you speak of? Legislation or the mortgage agreement?
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dutchca wrote: Also what givrs the bank this GIVEN RIGHT you speak of? Legislation or the mortgage agreement?
Established in Common law and codified in various Acts which gives to a homeowner, a mortgagee or a lien holder, interest in the property either by transfer, a registered mortgage or court order and consequently each has the right to vacate and assume any encumbrance that would take precedence over their own interest in said property so as to protect their interest. Even a tenant has that right.

Since this thread is about mortgages, for simplification, we can start with an example of Mortgages- Standard Charge Terms – every mortgage lender has these registered with Land Registry and referenced in all registered mortgage documents – jump to page 30 http://www.greatlaw.ca/sct/200430%20Investors.pdf

The Mortgages Act
Release of equity of redemption without merger of debt
10.(1)A mortgagee of freehold or leasehold property may take and receive from the mortgagor a release of the equity of redemption in the property, or may purchase the same under any judgment or decree or execution without thereby merging the mortgage debt as against any subsequent mortgagee or person having a charge on the same property.
Payment of principal upon default (this particular section for example allows 2nd mortgagees to pay off any outstanding amounts)
17.(1)Despite any agreement to the contrary, where default has been made in the payment of any principal money secured by a mortgage of freehold or leasehold property, the mortgagor or person entitled to make such payment may at any time, upon payment of three months interest on the principal money so in arrear, pay the same,...
Condominium Act
88 (1) (c) the mortgagee has the right to pay,
(i) the amounts of the owner’s contribution to the common expenses that from time to time fall due and are unpaid in respect of the mortgaged premises...
(ii) all interest owing and all reasonable legal costs and reasonable expenses that the corporation incurs in connection with the collection or attempted collection of the amounts described in subclause (i), including, where applicable, the costs of preparing and registering a certificate of lien and a discharge of it ,...
Most notably in the context of unpaid taxes - The Municipal Act - Sections 373; 374; and particularly Section 375:-
Before the expiry of the one*year period mentioned in subsection 379 (1), any
person may have the tax arrears certificate cancelled by paying to the municipality the cancellation price as of the date the payment is tendered and, after the expiry of the one
year period, a public sale shall be conducted by the treasurer in accordance with section 379. 2001, c. 25, s. 375 (1). Cancellation certificate
(2) If payment has been made under subsection (1), the treasurer shall immediately
register a tax arrears cancellation certificate. 2001, c. 25, s. 375 (2).
Construction Lien Act
(2) Upon the motion of any person, the court may make an order vacating the registration of a claim for lien, and any certificate of action in respect of that lien, upon the payment into court or the posting of security of an amount that the court determines to be reasonable in the circumstances to satisfy the lien. R.S.O. 1990, c. C.30, s. 44 (2).
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Jan 19, 2011
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rob444 wrote: If that's the case then how could anyone possibly have unpaid property taxes to the city spanning several years?? If the bank just pays off people's taxes, then according to the city nobody would ever owe years of taxes. I'm sure the city couldn't care less if it's the bank or home owner making the payments.
Mark77's answer: No mortgage. Paid up property. No bank involved.

Fieldhousehandyman's actual experience: Yes to a mortgage, Paid up property? No chance in hell! Bank involved? Absosmurfly! they were holding mortgage, but blithely unaware, in this case two banks let property taxes run up for three years past due... Twice over!
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
Penalty Box
Apr 15, 2011
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so I would like a clear answer to this question free of bickering and what not. In ontario, you can stop paying property taxes and be charged at only an intererst rate of 1.5% per year? Is this true or false? How long can you keep doing this, ie not pay property taxes for? What are some of the consequences to doing this? Will this affect your tax refunds? Will it affect your credit score? Anything else you can think of to add to this list.
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Feb 29, 2008
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blaznazn22 wrote: so I would like a clear answer to this question free of bickering and what not. In ontario, you can stop paying property taxes and be charged at only an intererst rate of 1.5% per year? Is this true or false? How long can you keep doing this, ie not pay property taxes for? What are some of the consequences to doing this? Will this affect your tax refunds? Will it affect your credit score? Anything else you can think of to add to this list.
I know being late doesn't affect your score. I'm not sure how long in arrears you must be before it affects your score. I'm guessing if they put a lien on your property it may affect your score? Just a guess. But I figue at that point they'll just take your property.
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Apr 4, 2009
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blaznazn22 wrote: so I would like a clear answer to this question free of bickering and what not. In ontario, you can stop paying property taxes and be charged at only an intererst rate of 1.5% per year? Is this true or false? How long can you keep doing this, ie not pay property taxes for? What are some of the consequences to doing this? Will this affect your tax refunds? Will it affect your credit score? Anything else you can think of to add to this list.
Isn't the interest rate 1.5% per month, instead of 1.5% per year?

Most AR is charged at similar rates ... % per month.
Penalty Box
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Aug 19, 2008
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blaznazn22 wrote: so I would like a clear answer to this question free of bickering and what not. In ontario, you can stop paying property taxes and be charged at only an intererst rate of 1.5% per year? Is this true or false? How long can you keep doing this, ie not pay property taxes for? What are some of the consequences to doing this? Will this affect your tax refunds? Will it affect your credit score? Anything else you can think of to add to this list.

The penalty for unpaid property tax is closer to 15%, not 1.5%. Stop paying your property tax in Ontario and that's all that's going to happen for at least two years. No impact on income tax. No impact on credit score. If you're renewing your mortgage the lender will require you to bring the taxes current. Realistically, you're looking at 4 to 5yrs before anything of consequence happens - - ie a forced tax sale.

Until then the banks WILL NOT pay your unpaid property tax, despite the farcical misinformation some clueless individuals have suggested above.
Licenced Realtor and P.Eng

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