A tax lien can be placed on the property when a homeowner does not pay their property taxes after a certain period. This is the beginning of a process known as a tax sale, wherein a municipality sells a property to recoup the delinquent taxes owed.

If you have unpaid property taxes, it’s best to find a way to pay them as soon as possible. Delinquent taxes are no joke. Municipalities rely on homeowners to pay their property tax bills on time; these taxes are used to fund their budget. Property taxes directly fund essential services, such as schools, garbage collection, snow-plowing, firefighter emergency services, and law enforcement.

The homeowner who owns the property forfeits ownership in a tax sale and has their delinquent taxes paid by the individual who bids and secures the property. Here is what to know about delinquent property taxes.

How Delinquent Taxes Impact Your Mortgage

Delinquent taxes can be a major problem when it comes to your mortgage. If your mortgage lender requires you to keep your property taxes up to date and you do not, a lender may refuse to renew your mortgage. This can put you in a very difficult position.

Another scenario may play out when a mortgage lender pays your property taxes for you and then demand immediate repayment. The result is losing your home.

How Long You Have To Pay Delinquent Taxes In Ontario

Every municipality is different. Some municipalities may give you up to three years to pay your property taxes before registering a Tax Arrears Certificate and putting your property up for sale. In contrast, others may make that move within one year of no payment.

heck your local municipality website for accurate information on the process for unpaid taxes where you live. Generally, after a Tax Arrears Certificate is registered, your municipality may provide you with as much as one additional year to pay for the taxes owing or lose permanent ownership of your home.

You May Be Able to Arrange A Payment Plan

You may be able to work with your local government on a payment plan before they try to foreclose and issue a tax lien. That said, even if you have a payment plan in place, it doesn’t guarantee they won’t be able to move forward with a tax lien.

What Happens When You Have a Tax Arrears Certificate

Once a Tax Arrears Certificate is registered against your home, new conditions are in place regarding homeownership. For example, after a tax lien is attached to your home, it prohibits the homeowner from selling the property unless the taxes are paid first. A tax lien will take priority over all other liens secured by your home. Also, partial payments cannot be accepted after there’s a tax lien in place. At this stage, a homeowner must pay the full property taxes owing, including all penalties and interest.

Expect Penalties, Interest, and Additional Fees On Top

After the deadline to pay property taxes has passed and it’s known that you are delinquent, your local government will start trying to recover what they’re owed. They will add lots of interest and penalties, increasing these amounts the longer the taxes are delinquent.

For a homeowner, this can mean hundreds of dollars in additional fees that you will be legally required to pay if you intend to keep your home.

What A Tax Sale Is About Delinquent Taxes

Your municipality will eventually advertise the sale of your property. Tax sales offer properties at a fraction of the cost the home is worth. All delinquent taxes, penalties, interest, and fees are included in the price of the tax sale.

Tax sales are advertised in local publications or online. Anyone can bid on a tax sale. This is not your standard real estate transaction. Despite the discounted price, for the buyer, purchasing a property through a tax sale sight unseen comes with a certain risk.

How to Buy Tax-Delinquent Properties

If you want to buy a tax-delinquent property, here’s some of the best advice you can get.

  • Do your due diligence and research. See if there are other liens on the property. A prospective tax sale buyer cannot conduct a home walk-through or see inside. However, you may visit to look at the property from the road.
  • Set a budget for a tax sale. It can be easy to overbid in a tax sale auction or when submitting an offer by public tender.
  • You must come to the tax sale ready to close. Have the funds available with cash or a certified cheque.

After a Tax Sale Occurs, a Homeowner Can Regain Their Home

Even after a tax sale in Ontario has gone through, the previous homeowner still has up to 1 year to pay the property taxes and fees owing and regain homeownership in full. However, when it reaches the point where a tax sale has gone through, it’s unlikely that most individuals will have the resources to cover the costs and fees associated with regaining their property.