Can You Sell a House With Unpaid Property Taxes in Toronto?
Yes, you can sell a house with unpaid property taxes in Toronto. The overdue amount does not block the sale, but it has to be cleared on closing, usually out of your sale proceeds.
Property taxes sit at the front of the line. Under the City of Toronto Act, 2006, taxes are a special lien on the land that ranks ahead of every other claim except the Crown's, mortgages included. The City does not have to register anything for that priority to hold. That sets arrears apart from the situation covered in our explainer on selling a house with a lien. A buyer's lawyer checks the tax account before closing and will expect the balance to be paid off.
The amount owing keeps climbing. The City adds a late payment charge of 1.25 per cent on the first day of default and on the first day of every month after, for as long as taxes stay unpaid, and it says that charge cannot be waived. If you are unsure how the bill was built in the first place, how property taxes are calculated in Toronto breaks it down.
Your real estate lawyer handles the mechanics. They obtain a current balance from the City and pay it from your proceeds on closing day, alongside any mortgage payout.
Age of the arrears matters. Once taxes have been unpaid for at least two years, the City registers a tax arrears certificate on title, and the owner then has one year to pay the full cancellation price, which covers the taxes, penalties and costs. After that the City is required to proceed with a sale by public tender. Selling on the open market lets you control the timing and the price. A tax sale does not.
The one real obstacle is a balance larger than the house will net after the mortgage and selling costs. In that case the shortfall has to be covered before the sale can close.
Related reading: What Is a Statement of Adjustments in Ontario Real Estate?, What Is a Power of Sale and How Does It Work in Ontario? and Can You Sell Your House in Ontario If You Owe More Than It's Worth?
