Tax sales and superpriority liens

Tax time

Tax timeIt always surprises me when I find out before closing a purchase or sale for a client that there are significant unpaid property taxes. While most people are aware of the requirement to pay them, I think that many don’t realize that municipalities actually have some pretty serious enforcement powers if you don’t pay. In fact, if you are far enough behind, the municipality can actually sell your property out from under you in order to pay the back taxes. This is an extreme solution and doesn’t happen often, but if you are far enough behind, it is a very real possibility.

Another tax collector who can cause havoc? Canada Revenue Agency. If you don’t pay your income taxes, or HST if you are in business, they can assert what is called a superpriority lien against  your house. This means that, even if you got a mortgage before your taxes became due, they can claim their money before your bank gets paid. Often, this results in extreme difficulty selling your house – especially since they don’t have to actually register the lien and you may not know until days before closing.

The bottom line? Pay your taxes, all of them, and if you’re behind, always let your lawyer know.