Casual Legal: Selling tax recovery property after an unsuccessful public auction
DISCLAIMER: This article is meant to provide information to Alberta Municipalities members only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated. This content is not intended for the general public.
By Ben Throndson
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
The Municipal Government Act (MGA) contemplates public auctions of lands as the main tool for municipalities to recover unpaid tax arrears. But what if the parcel does not sell at auction?
Where a tax recovery property does not sell at a public auction, the municipality may become the owner of the parcel under section 424 of the MGA. To do so, the municipality must request that the Land Titles Office issue a new certificate of title in the name of the municipality. The new title is marked “tax forfeiture”. If a municipality becomes the owner of a parcel of land under section 424, the municipality acquires certain rights to deal with that parcel under section 425.
First, the municipality may sell the parcel at a price that is as close as reasonably possible to the market value of the parcel. In the MGA, “market value” means the amount that a property might be expected to realize if it is sold on the open market by a willing seller to a willing buyer. Note that ordinary advertising requirements that apply to sales below market value under section 70 of the MGA do not apply to sales of land following unsuccessful public auctions. Second, the municipality may deposit the amount of money it would have been willing to sell the land for into a separate account designated for tax sale proceeds. Third, instead of selling the parcel, the municipality may also grant a lease, licence, or permit in respect of the parcel.
It is also important to recognize that the prior owner of the property retains a right to revive their title upon paying outstanding arrears. This right continues up until the time that the municipality sells the parcel under section 425 of the MGA. On payment of the tax arrears, the municipality must notify the Land Titles Office, which will cancel the municipality’s certificate of title and revive the certificate of title of the prior owner.
Municipalities should also be aware that simply becoming the owner of a parcel under section 424 does not automatically erase all prior registrations on title. Section 424(3) lists certain types of registrations that will carry over to the municipality’s title. The Land Titles Office will also not remove title registrations where the registering party would not have received a tax recovery notice when the parcel was first put into tax recovery status. In summary, certain registrations may carry over to the municipality’s new title and it remains important to search title and deal with any registrations on title that a buyer will not accept before selling the lands under s 425.
Sections 427 and 428 of the MGA establish rules that apply to how municipalities must deal with sale proceeds from lands sold at a public auction. Although a full summary of these rules is beyond the scope of this article, municipalities should familiarize themselves with these provisions and seek advice as necessary if there is a question regarding how the municipality is to deal with these sale proceeds.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or riskcontrol [at] abmunis.ca (email) to connect with Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
