Property Tax: Basic things you need to know

Property tax is an unfortunate reality for homeowners.  They can be paid in installments (monthly, four or six times a year) or for some it is added into their mortgage payments (lenders may insist on making the payments).  There are a few basic things that you should understand about your property taxes, check out my list below.

1. How your tax is calculated?

This is a simple calculation based on the assessed value of your home and the current tax rate.  For example if your house is worth $300,000 and the tax rate is 2% you would pay $6000. Click here to calculate your property taxes in the City of Toronto.

2. Who determines the assessed value?

This is done by and organization (non-profit) called MPAC (which stands for Municipal Property Assessment Corporation).  The assessed value is meant to be indicative of what your property would sell for, but there are always exceptions so if you think your assessment isn't fair you should contact MPAC.  If you go online they have the steps required to challenging your assessment, click here to go to the site.

3.  Who determines the tax rate?

The tax rate is a combination of your city/town council tax rate set out it its annual budget, the regional council (if applicable) and the province's rate.  The tax is collected by the City and then disbursed as needed.  The unfortunate reality is that you have really very little control in changing the tax rate (unlike the assessed rate), unless you plan on running for office or regularly challenging your elected representative!

4.  The downside to being late.

Do not be late with your payments as the City of Toronto (along with most other places) WILL charge you with late payment charges. That is just the start of the collection process. there are an assortment of additional charges along the way!  The list below is from the City of Toronto website and is a complete summary of the City's collection process.

1. Penalty / Interest Charges

A penalty of 1.25% on the unpaid amount of an instalment will be added on the first day after the instalment due date. A further 1.25% of the outstanding amount will be added as interest on the first day of each month thereafter, as long as taxes remain unpaid. Monthly interest charges are also imposed on any unpaid taxes from prior years. Penalty and interest rates are set by City by-laws, pursuant to the City of Toronto Act, 2006. Penalty and interest charges on overdue amounts cannot be waived or altered.

If taxes and charges are overdue, payments are applied to the oldest outstanding balance first. Fees may also be added when taxes are outstanding.

2. Statement of Tax Account
Statements of Tax Account are mailed to property owners in arrears advising that their property taxes are overdue. 

These statements are mailed:

  • At the beginning of each year
    (on tax accounts with an overdue amount as at December 31st)
  • After the 1st Instalment due date of the Interim Tax Bill (March)
  • After the 3rd Instalment Due Date of the Interim Tax Bill (May)
  • After the 1st Instalment Due Date of the Final Tax Bill (July)
  • After the 3rd Instalment Due Date of the Final Tax Bill (September)
  • If a statement is issued to you, a fee will be added to your property tax account to cover the cost of producing and mailing the statement. This fee will be included in your statement amount. 

    Statement Fee: $16 each statement

    3. Collection Letters and Telephone Contact

    A Revenue Collector may contact owners of accounts with outstanding current year taxes, by way of phone calls or letters, to arrange either full payment or a firm, suitable payment arrangement. 

    4. Final Notices

    Final Notices – Residential Property

    Final Notices are issued as one last notification to the property owner of their outstanding balance prior to the issuance of tax arrears to a Bailiff.

    In or around April of each year, Final Notices are mailed to those residential property owners with a previous year's outstanding balance. 

    The Final Notice advises that they have 21 days to pay their taxes, or enter into a firm, suitable payment arrangement with the City, or their account will be issued to a bailiff for collection.

    All accounts that fail to respond to the Final Notice are issued to a bailiff beginning in May. 

    Final Notices – Non-Residential Properties 
    In November of each year, "Final Notices" are mailed to all non-residential property owners with a current year's outstanding balance. 

    The Final Notice advises that they have 21 days to pay their taxes, or enter into a firm, suitable payment arrangement with the City, or their account will be issued to a bailiff for collection. 

    All accounts that fail to respond to the Final Notice are issued to a bailiff beginning in January of the following year. 

    If a Final Notice is issued to you, a fee will be added to your property tax account to cover the cost of producing and mailing the notice. This fee will be included in your statement amount.

     

    Final Notice Fee: $21 per notice

    5. Issuance of Tax Arrears to a Bailiff
    A bailiff serves a Notice of Issuance to Bailiff: 

    Residential Properties
    If a residential property owner fails to respond to the "Final Notice" and has outstanding taxes from the previous year in the amount of $100 or more, the account is issued to a bailiff. 

    The City will issue a Notice of Issuance to Bailiff to the taxpayer indicating that their outstanding tax balance has been issued to a bailiff, and that any further payments on the outstanding amount must be made to the bailiff for collection of unpaid amounts. 

    Non-Residential Properties 
    If a non-residential property owner fails to respond to the "Final Notice", the City will issue a Notice of Issuance to Bailiff to the taxpayer indicating that their outstanding tax balance has been issued to a bailiff, and that any further payments on the outstanding amount must be made to the bailiff directly. 

    If a Notice of Issuance to Bailiff is issued to you, a fee will be added to your property tax account to cover the cost of producing and mailing the statement. This fee will be included in your statement amount.

    Notice of Issuance to Bailiff Fee: $56 per notice


    Information on Bailiffs 

    The City of Toronto Act, 2006 permits municipalities to use the services of a bailiff in the collection of property tax arrears. 

    A bailiff is a duly appointed agent under contract with the City of Toronto to recover outstanding property taxes. The costs of the bailiff service are the full responsibility of the property owner. 

    Bailiff tax recovery actions include:

    • Serving a Warrant to Distrain for Taxes to the assessed address advising the property owner of default of such outstanding taxes, penalties and lawful cost of said distress.
    • Mailing notices to the property owner advising that a warrant has been issued and the amount of the warrant.
    • Title searches.
    • Telephone contact with the property owner(s), mortgage holder(s) and all other parties that appear on title.
    • Site visits.
    • Attornment of Rent(s) (i.e. if a property is tenanted, the bailiff can direct the tenant(s) to submit rent payments to the bailiff. These attorned rents are then applied against the outstanding property taxes).
    • Issuing a Warrant to Distrain Goods/property (i.e. the bailiff can register a common law lien against goods/property located in or on an owner's property).
    • Issuing a Warrant to Seize Goods/Chattels (i.e. the bailiff can physically seize and remove goods/chattels from the property and ultimately sell items seized to recover the tax arrears.

    6. Municipal Tax Sale Proceeding

    Once all other collection efforts are exhausted, and the City has been unable to secure payment of the tax arrears, or a firm, suitable repayment plan, the City commences Municipal Tax Sale Proceedings as prescribed by the City of Toronto Act, 2006

    Municipal Tax Sale proceedings can begin once taxes have been in arrears for at least three years. The first step in the Municipal Tax Sale process requires the City to register a Tax Arrears Certificate on title of a property. 

    The debtor has one year from the date of registration of a Tax Arrears Certificate on title of the property to pay the cancellation price (which includes all of the taxes levied and outstanding, all accrued penalty/interest and costs). 

    Failing payment within that year, or the entering into of an extension agreement, the Treasurer is required to proceed with a sale of the property through a public auction or public tender. 

     

     

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