A sheriff sale in Ontario can happen when a creditor uses court enforcement to sell a debtor’s interest in land. This is different from a mortgage power of sale, but both can put a property at risk. If you have received notice of a sheriff sale, writ, judgment, or enforcement action, it is important to understand the process and act quickly.
In most cases, we advise clients to try to stop a sheriff’s land sale since the homeowner could lose all their equity in the house. Please go to our home page for more information regarding power of sales and sheriff land sales.
Tough economic times will force many Ontarians to face the harsh reality of having their home subject to a tax sale.
In May of 2020, the Bank of Canada announced that it expected mortgage arrears rates to climb to 48% in Q1. As homeowners continue to try and keep up with payments during the financial impact of COVID-19, it is expected the number of Power of Sales or Foreclosures will also continue to rise. If a homeowner is unable to pay their taxes, then they will be subject to a Tax Sale.
Tax Sale vs. Power of Sale
A Power of Sale happens when the homeowner fails to make their mortgage payments. In Ontario, a lender can start the power of sale process by sending a Notice of Sale, which gives the borrowers a 35-day notice to send payment. A Tax Sale happens when the homeowner has missed their tax payments for up to three years. The municipality attempts to recover unpaid property taxes through the forced sale of the home.
A tax sale supersedes any existing mortgages on the property except those in favour of the “Crown,” such as the government of Ontario or the government of Canada.
The home is then put up for public auction or public tender where people can bid on the home through a minimum tender amount that must cover the outstanding taxes, penalties, interest, and municipality costs. A public tender is the most common form of tax sale in Ontario.
Public Auction vs. Public Tender
A public auction is similar to a traditional auction, where you are allowed to be present at the sale. It also allows you the opportunity to continue bidding on the property if you are outbid by someone else. The person who bids the highest amount will ultimately get the property.
A public tender is a closed process where the potential buyer must put a bid on the property using a sealed envelope. A bank draft or certified cheque for 20% of the final offer is also required. A bid at the amount currently owed on the property does not determine whether or not you can purchase the property. Instead, the highest bid overall will determine who can make the purchase.
How Do I Stop A Tax Sale?
Most lenders will advise homeowners to try and stop a tax sale. This can be done in several ways. The most important thing to do is to show that you are making an effort to pay the taxes.
Take steps to secure additional money through:
Purchasing A Tax Sale Property
- Getting a second mortgage
- Sell the property and use the proceeds to pay down debts
- Redeem the property by paying the deed holder the auction price plus interest and costs.
For new home buyers, a tax sale can be a great way to enter the property ladder. Homes sold through tax sales often sell below what you would pay in a traditional real estate environment. It is also a great way to begin investing in home buying, allowing a buyer to purchase multiple properties at a great price.
Many buyers use those as an opportunity to get into the ‘house flipping’ business, buying homes at a low price and fixing them up to sell in the future at a profit. Though they may seem like a steal, it is important to proceed with caution. Tax sales can still be subject to costs and fees after the deed has been transferred.
There are several things to take into consideration before you attempt to buy a home through a tax sale. It is important to do your due diligence to avoid making a purchase you will regret later.
- Inspect the property – As a potential buyer, you have the right to inspect the home or property before the sale. However, it is important to note that you are purchasing the property ‘as is’ and no repairs or adjustments will be made before the sale.
- Legal obligations – If you purchase a property through a tax sale, you will be responsible for any outstanding debts owed on the property.
- Environmental cleanup – If you purchase a property on contaminated land, you will be responsible for any environmental cleanup or other legal obligations related to the maintenance of the property.
Always do a title search before purchasing at a tax sale. This will give you a full rundown on the property so you have a clear picture before bidding.
Where Do I Find Homes Available Through A Tax Sale?
All tax sale properties up for sale each month are published by the Ontario government via The Ontario Gazette. Make sure to investigate any property being offered to get an idea of general market values and any damage done to the property. The auctions for tax sales typically have very intense competition and they’ll require that you have a down payment and mortgage arrangements already prepared.
Frequently Asked Questions (FAQ)
Get clear answers about sheriff sales and land enforcement in Ontario.
These common questions explain how a sheriff sale works, how it differs from power of sale and foreclosure, and what you can do to stop one.
What is a sheriff sale in Ontario?
A sheriff sale in Ontario is usually a court-enforcement sale where a creditor uses a writ, such as a Writ of Seizure and Sale of Land, to enforce a judgment against a debtor’s property.
Is a sheriff sale the same as power of sale?
No, a sheriff sale usually comes from court enforcement of a judgment, while power of sale is a mortgage lender’s remedy after mortgage default.
Can a sheriff sell my house in Ontario?
Yes, if a creditor has the proper judgment and writ filed against land you own, enforcement steps may eventually lead to the sheriff selling the property.
How do I stop a sheriff sale?
You may be able to stop a sheriff sale by paying the judgment debt, negotiating with the creditor, challenging the enforcement legally, refinancing, selling the property, or getting urgent legal advice before the sale proceeds.
What is the difference between a sheriff sale and foreclosure?
A sheriff sale is usually a judgment-enforcement process, while foreclosure is a mortgage court process where the lender seeks ownership of the property instead of simply selling it under power of sale.