At 10:00 am on October 7, 2024, municipal tax collectors across British Columbia will conduct the statutorily mandated annual tax sale for 2024. Properties with delinquent property tax accounts, which are those with three years of unpaid property taxes, will be sold to the highest bidder above the “upset price.” The upset price is the amount of outstanding taxes plus penalties, interest, costs, and fees.
When a property sells at the annual tax sale, the owner (or another interested party) will have one year to redeem the property by paying the upset price to the collector, plus applicable costs, taxes, and interest. If the property owner or other interested party does not redeem within the redemption period, the property will be transferred to the new owner (being the person who was the highest bidder at the tax sale) and the former owner will receive any surplus amount paid for the property above the upset price. As a result, a relatively small amount of unpaid taxes may result in a major loss of home equity for the former owner.
Requirement to Serve Notice of Tax Sale and Redemption Period
Section 657 of the Local Government Act (the “LGA”) requires municipal tax collectors to provide notice of the tax sale and redemption period to the owner and all charge holders of a property within three months after it has been sold at the annual tax sale. The municipal tax collector may serve this notice upon the owner and charge holders by personal service or registered mail. If the tax collector fails to give this notice, it can render a tax sale invalid or expose the municipal tax collector to liability.
In Morgan v Spallumcheen (Township of), 2022 BCSC 752, a municipal tax collector failed to comply with the notice requirement under s. 657 of the LGA and was ordered to pay the owner the fair market value of the property sold ($360,000.00) less the delinquent taxes. The significance of the notice requirement was emphasized by Mr. Justice Weatherill at paragraphs 42 and 43 of the decision:
[42] In my view, the exercise of the legislative power to sell property at a tax sale for pennies on the dollar (as occurred here) brings with it a duty on the local government to, among other things, ensure the property owner and charge holder know about the sale and are given ample opportunity (the legislation provides for one year) to redeem the property. It is only after the property owner/charge holder have been duly notified of the tax sale and have been given the opportunity to redeem the sale and have failed to do so, that the sale is allowed to be finalized.
[43] Failure on the part of the local government to follow the legislation, including failure to notify the owner/charge holder brings with it, and should bring with it in my view, significant consequences, namely having to fairly compensate (that is, indemnify) the owner/charge holder for any losses and damages resulting from the sale.
The importance of providing notice of tax sales, particularly in the context of vulnerable persons, was a highlight of the Ombudperson’s Public Report No. 53: A Bid for Fairness: How $10,000 in property tax debt led to a vulnerable person losing their home. Municipal tax collectors must be vigilant to ensure that the notice requirements under the LGA are met and ought to take all reasonable steps, whether legislated or not, to ensure that owners and charge holders are properly informed of a tax sale.
Applications for Substituted Service Method
Providing notice under s. 657 of the LGA within the three-month timeline can present challenges. Personal service is the gold standard, but an owner may be difficult to locate, evasive, lacking capacity, or deceased. Although the LGA permits service of the notice by registered mail, service is not effective if the registered mail is uncollected (see Maple Ridge (Re), 2020 BCSC 1473 at para 25).
If a person cannot be located or there is any doubt about the validity of service, a municipal tax collector should apply to the Supreme Court of British Columbia for an order permitting the notice to be served by a substitute method, pursuant to s. 657(2) of the LGA. We recommend seeking the assistance of legal counsel to make such an application.
Municipalities must obtain and follow an order for substituted service within three months of the date of the tax sale. To ensure that legal counsel can obtain an order within the allotted time, the municipal tax collector should seek legal advice early, keep records of all attempts to contact and serve the owner or charge holder, and make note of any information that indicates a certain substitute method of service is likely to provide the owner or charge holder with notice.
Potential Advance Notice Requirement for Tax Sales
In the coming years, municipal tax collectors will likely be required to serve notice of a tax sale upon owners and charge holders in advance of tax sales. Section 647.1 of the LGA, which is set to come into force by regulation at a future date, will require municipal tax collectors to serve owners and charge holders with notice of the tax sale, along with relevant details, at least 60 days before the tax sale occurs. Once s. 647.1 is in force, failure to provide advance notice can render a tax sale invalid or expose the municipal tax collector to liability.
The operation of the new advance notice provisions under s. 647.1 will be very similar to the operation of the current notice provisions under s. 657. Municipal tax collectors may serve owners and charge holders by personal service or registered mail. When service cannot be effected, municipal tax collectors can apply to the Supreme Court of British Columbia for an order permitting substituted service, pursuant to s. 647.1(3).
The new advance notice requirement will make the tax sale process more onerous for municipal tax collectors, but it will ensure that owners and charge holders are sufficiently informed. Additionally, this requirement will assist municipal tax collectors in identifying owners and charge holders who may be difficult to serve, or require a substituted service method, earlier in the tax sale process. We recommend that municipal tax collectors act early to serve notice pursuant to s. 647.1, which can be issued at any time during the year of the tax sale, provided it is served at least 60 days before the sale.
Key Takeaways
- Section 657 of the Local Government Act requires municipal tax collectors to serve notice of tax sale and redemption period to owners and charge holders of a property sold at a tax sale within three months of the tax sale by personal service or registered mail.
- Failure to serve notice within three months in accordance with s. 657 of the Local Government Act can render a tax sale invalid and expose the municipal tax collector to liability, which may include indemnifying the owner or charge holder for any loss or damage sustained by the person on account of the sale of the property.
- If an owner or charge holder cannot be personally served or registered mail is uncollected, the municipal tax collector should consult legal counsel to bring an application for a substituted service method immediately.
- Section 647.1 of the Local Government Act is set to come into force by regulation at a future date and will require municipal tax collectors to serve notice of tax sale, along with relevant details, to owners and charge holders of a property at least 60 days before it is sold at a tax sale. The operation of s. 647.1 will be very similar to s. 657, once it is in force.
