In Ontario, a municipality can start the tax sale process once property taxes have been in arrears for roughly two years. It registers a tax arrears certificate on title. From that date, anyone with an interest in the property has one year to pay the full cancellation price. If it is not paid, the municipality can offer the property for public sale.
A letter from the tax office about arrears can be frightening, especially if you thought the taxes were being paid or you inherited the problem. There is usually more time than it feels like right now, but the deadlines are real, so it helps to get the exact numbers early.
How does a tax sale work in Ontario?
Property taxes that go unpaid become a priority claim against the property. If they stay unpaid, the municipality can eventually sell the property to recover them. Outside Toronto, the process is set by Part XI of the Municipal Act, 2001. Toronto follows a similar process under the City of Toronto Act, 2006 and the Toronto Tax Sales Rules.
The usual sequence looks like this:
- Arrears build up. The municipality adds late charges and sends reminders. Toronto, for example, adds 1.25% on the first day of default and on the first day of each month after, and says these charges cannot be waived.
- Collection steps. Letters, a final notice, and sometimes a collection agency or bailiff, depending on the municipality.
- Tax arrears certificate. Once taxes have been unpaid for about two years (the rule is measured from January 1 of the second year after the taxes were owing), the treasurer can register a tax arrears certificate on title.
- One-year window. The owner, a mortgage lender or anyone else with an interest can cancel the certificate by paying the full cancellation price within one year of registration.
- Public sale. If it is not paid, the municipality can advertise the property for sale by public tender or auction.
This is general information. Your municipality's notices and dates are what count, so read them carefully and keep copies.
What is the cancellation price?
The cancellation price is the full amount needed to stop the process. Municipalities describe it as all tax arrears owing, current taxes owing, interest and penalties, and the municipality's reasonable costs of the tax sale process. Those costs can include title searches, registrations and legal work, so the figure is higher than the tax arrears alone.
During the one-year period, most municipalities will not accept partial payments unless the owner has signed an extension agreement. An extension agreement is a written payment arrangement that can stop the property from being offered for sale while you keep to its terms. Whether one is offered is up to the municipality.
Ask the tax office for the cancellation price in writing, with the date it is calculated to, because it grows every month.
What happens to your equity if the property is sold?
At a tax sale, the minimum acceptable bid is generally the cancellation price. If the winning bid is higher, the extra money does not go straight to the former owner. Municipalities pay the surplus into court. People with a claim, such as the former owner or a mortgage lender, can then apply to the court for it.
If no acceptable bid is received, the municipality can register a notice vesting the property in its own name, or it may re-advertise it. Either way, waiting for a tax sale usually means giving up control of the price, the timing and the costs. That is why many owners with equity look at their options well before the one-year window closes.
What if you have a mortgage?
If your mortgage has a tax account, your lender pays the taxes for you. If it does not, most mortgages still let the lender pay overdue taxes to protect its security and add the amount to your loan. Unpaid property taxes can also be treated as a default under the mortgage.
So tax arrears can turn into a mortgage problem quickly. Call your lender early and ask how it treats unpaid taxes. If the lender has already sent a notice, see our guide to selling before power of sale.
Your options, compared
| Option | When it can work | What to weigh |
|---|---|---|
| Pay the arrears in full | You have savings, family help or refinancing | Late charges keep growing until paid |
| Extension agreement with the municipality | You can make regular payments after a certificate is registered | Only if offered; missing a payment can restart the sale |
| Refinance or borrow against equity | You have equity and qualifying income | Interest cost and lender approval time |
| Sell the property yourself or through an agent | You have time before the one-year window ends | Showings, conditions and closing date must fit the deadline |
| Sell directly for cash | The deadline is close or the home needs work | The price may be lower than an open-market sale; compare offers |
When a property sells, the arrears are paid out of the sale proceeds on closing through the lawyers' statement of adjustments. You keep what is left after the mortgage, taxes and other registered claims are paid. Our guide to comparing a cash offer with listing shows how to estimate your net.
What to do this week
- Call the municipal tax office. Ask for the total owing, whether a tax arrears certificate has been registered and, if so, the registration date and cancellation price.
- Ask about payment options. Ask whether an extension agreement or any relief or deferral program is available to you.
- Call your mortgage lender if you have one.
- Talk to a real estate lawyer. The Law Society Referral Service can connect you with one.
- Get a realistic value for the property and compare selling routes before the deadline gets close.
Sources we checked
We checked these government, court and legal-information sources on September 26, 2026. Rules and amounts can change, so confirm the details for your situation with a lawyer, accountant or licensed insolvency trustee.
- Ontario — Municipal tax sale procedures (land registration bulletin)
- Municipal Act, 2001 (Part XI — Sale of land for tax arrears)
- City of Toronto — Late tax bill payments
- City of Toronto — Sale of land by public tender
- City of Owen Sound — Tax sales (example municipal process)
- Law Society of Ontario — Law Society Referral Service
Common questions
How many years of unpaid property taxes before a tax sale in Ontario?
A municipality can register a tax arrears certificate once taxes have been in arrears for about two years, measured from January 1 of the second year after they were owing. After that, there is a one-year period to pay the cancellation price before the property can be offered for sale.
Can I make partial payments after a tax arrears certificate is registered?
Usually only if you sign an extension agreement with the municipality. Without one, many municipalities accept only full payment of the cancellation price during the one-year period.
Can I sell my house if I owe property taxes?
Yes, in most cases. The arrears are paid out of the sale proceeds on closing. The sale needs to close before the one-year cancellation period ends, so plan the closing date with your lawyer.
Do I get the money left over after a tax sale?
Not automatically. Surplus proceeds are paid into court, and people with a claim, such as the former owner or a mortgage lender, must apply to the court to receive them. Talk to your lawyer about how to make a claim.
Can the municipality waive the penalties?
Generally not. Toronto, for example, says penalty and interest charges on overdue taxes cannot be waived or changed. Ask your municipality whether any relief program applies to you.
Prepared by our team for Ontario homeowners. This is general information, not legal, tax or financial advice on a particular transaction. Editorial approach and corrections.
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