A property tax sale is the process a municipality uses to sell a home after its owner has fallen years behind on property tax, recovering the unpaid amount through a public sale instead of suing the owner directly. In Toronto, this runs under section 344 of the City of Toronto Act, 2006; everywhere else in Ontario, the same mechanism sits in Part XI of the Municipal Act, 2001, and the two work almost identically. For an owner who has just received a tax arrears notice, the process can feel sudden, but a real, specific window to stop it exists right up until the sale itself. For a buyer, a tax sale property can look like a way to acquire real estate below market value, and in a narrow sense it can be, but the risks are as real as the opportunity. This guide covers how a municipality gets to this point, what actually stops it, how the sale itself works, and how it differs from a power of sale, alongside everything else a Toronto purchase involves in our complete Toronto real estate guide.
What a property tax sale actually is
A property tax sale is a municipality’s own statutory remedy for unpaid property tax, not a court process and not something a bank or a private creditor initiates. Once a property in Toronto is two or more years behind on tax, specifically, once any part of the tax is still owing on January 1 of the second year following the year it became due, the City’s treasurer can register a tax arrears certificate against the property’s title. That certificate is a matter of public record and it starts the clock on everything that follows. Outside Toronto, the same trigger and the same two-year threshold apply under Part XI of the Municipal Act, 2001, since the two statutes use nearly identical language for this specific process.
Registering the certificate doesn’t put the property up for sale immediately. It opens a one-year cancellation period, and only once that year passes without the arrears being paid does the municipality move to advertise and sell. Most owners who reach this stage have received repeated tax bills, late notices, and interest charges for two years before a certificate is ever registered, so a tax sale is closer to the end of a long, documented process than a sudden seizure. Our guide to how property tax works in Toronto covers the annual bill itself, the one that has to go unpaid this long before any of this starts.
How to stop a tax sale: the cancellation price and the redemption window
Yes, and this is the single most important fact for an owner facing one. At any point up until the tender closes, the owner, or anyone acting for them, can pay the full cancellation price and the certificate is cancelled outright. The cancellation price isn’t just the original unpaid tax. It’s every dollar of tax arrears owing, plus accumulated interest and penalties, plus the municipality’s own costs of running the process, calculated as of the day payment is made. It’s a real number, often larger than what first triggered the certificate, but paying it in full is the genuine, available off-ramp, not a technicality that sounds available and isn’t.
The practical window is roughly a year from the date the certificate is registered, though the City can extend how long it advertises before opening tenders, so the real time an owner has can run longer. The one thing that doesn’t change is the deadline itself: once tenders are opened, the sale can proceed, and payment after that point no longer stops it. An owner who gets a tax arrears notice should contact the City’s own tax office directly to confirm the exact cancellation price and how much time remains, rather than estimate it from the original bill.
A tax sale versus a power of sale: what’s different
These two get confused constantly, and the confusion matters because the process, the timeline, and who’s actually in control are all different. Our guide to power of sale in Ontario covers the full mechanics, but the short version: a power of sale is a lender’s remedy after a homeowner defaults on their mortgage, run under the Mortgages Act, with the lender, not the municipality, controlling the sale. A tax sale is triggered by unpaid property tax, not a missed mortgage payment, and it’s the municipality, not any lender, that registers the certificate and runs the sale.
A property can theoretically face both processes at once, since a homeowner in serious financial trouble can fall behind on tax and mortgage payments in the same stretch, but they proceed independently under different statutes, with different authorities, different timelines, and different sale mechanics. Reading about one and assuming it explains the other is the most common mistake either term produces.
How the sale actually works, from a buyer’s side
Once the cancellation period expires without payment, the municipality advertises the property for sale by public tender, a sealed-bid process rather than a live auction, for a minimum of 60 days in the Ontario Gazette, on the municipality’s own website, and typically in a local newspaper. Anyone can submit a bid. The minimum tender amount is set at the cancellation price as of the first day of advertising, not the property’s market value, and a bid has to meet or beat that number to be considered. Every tender has to include a deposit, generally 20% of the bid, by certified cheque or bank draft, submitted in a sealed envelope by the stated deadline.
The real risk sits in what a tax sale doesn’t include. There’s no interior access before bidding in almost every case, no seller disclosures, no property condition statement, no financing condition, and no normal due-diligence period the way a resale purchase has. The property is sold entirely as-is, and the successful bidder can end up owning a home they’ve never been inside, sometimes still occupied by the former owner or a tenant, with repairs or legal issues they had no way to inspect for in advance. That trade-off, a below-market minimum bid against genuinely blind risk, is the real shape of a tax sale purchase: weigh it plainly, and don’t assume the discount comes free.
What happens to a mortgage or other registered interest
When the municipality registers the tax deed transferring the property to the successful bidder, most private registered interests on the title, an existing mortgage, a line of credit secured against the home, a construction lien, a judgment registered by a private creditor, are deleted from title as part of that registration. The new owner generally takes the property free of those.
Crown interests are the exception. A mortgage or lien held by the federal or provincial government, or a debt like a Canada Revenue Agency lien registered against the property, is a Crown interest and it survives a tax sale. If one exists and isn’t satisfied, the government that holds it can still pursue the property to collect on it, even after a new owner has paid for it at tender. Confirming whether any Crown interest is registered against a specific property, and reviewing the parcel register with a real estate lawyer before bidding, isn’t optional due diligence on a tax sale purchase, since the normal title search and title insurance protections of a resale deal don’t apply the same way here.
Frequently asked questions
What is a property tax sale in Ontario?
A property tax sale is a municipality’s own statutory process for selling a property after its property tax has gone unpaid for two or more years, run in Toronto under section 344 of the City of Toronto Act, 2006 and elsewhere in Ontario under Part XI of the Municipal Act, 2001. Once a certificate of tax arrears is registered against the title, the municipality can eventually sell the property by public tender if the arrears still aren’t paid. It’s entirely separate from a lender-driven process: no bank, mortgage company, or private creditor is involved, and the sale is run by the municipality itself to recover unpaid tax, not by anyone the owner borrowed money from.
Can a property tax sale be stopped?
Yes, right up until the tender closes. Paying the full cancellation price, all the tax arrears owing plus accumulated interest, penalties, and the municipality’s own costs, cancels the tax arrears certificate and stops the process entirely. This is a genuine, available right, not a formality: an owner who pays the cancellation price in full before tenders open keeps the property. The City’s tax office can confirm the exact current cancellation price for a specific property, since it grows with interest and costs the longer it goes unpaid, and beyond paying it, a real estate or municipal lawyer is the right resource for anything more complicated, like a payment plan or a dispute over the amount owing.
How is a tax sale different from a power of sale?
A tax sale is triggered by unpaid property tax and run by the municipality; a power of sale is triggered by a missed mortgage payment and run by the lender under the Mortgages Act, as covered in our guide to power of sale in Ontario. They’re different remedies for different debts, controlled by different parties, with no overlap in process or authority. A property can, in rare cases, face both at once if an owner has fallen behind on both tax and mortgage payments, but each process runs on its own separate track under its own statute, and stopping one has no effect on the other.
How does buying a tax sale property actually work?
A tax sale property is sold by sealed public tender, not a live auction, advertised for a minimum of 60 days with the minimum bid set at the property’s cancellation price rather than its market value. Every bid needs a deposit, typically 20% of the tendered amount, by certified cheque. The property is sold entirely as-is: no interior access before bidding in almost every case, no seller disclosures, no financing condition, and none of the ordinary due-diligence period a resale purchase allows. A below-market minimum bid is the opportunity; buying a property you’ve never seen inside, possibly still occupied, with unknown condition and legal issues, is the real risk that comes with it.
What happens to a mortgage on a tax sale property?
Most private registered interests, including an existing mortgage, a home equity line of credit, or a construction lien, are deleted from title when the municipality registers the tax deed to the successful bidder, so the new owner generally takes the property free of them. The exception is a Crown interest, a mortgage or lien held by the federal or provincial government, or a debt like a CRA lien, which survives a tax sale and can still be pursued against the property afterward. Reviewing the parcel register with a real estate lawyer before bidding is the only way to know whether a Crown interest exists on a specific property.
What should I actually do next?
If you’ve received a tax arrears notice, contact your municipality’s tax office directly to confirm the exact cancellation price and how much time remains before it’s too late to pay it, and bring in a real estate or municipal lawyer for anything beyond simply paying the arrears. If you’re considering a tax sale property as a buyer, treat it as a specialized, higher-risk path to ownership, not a shortcut to a deal, and have a lawyer review the parcel register for Crown interests before you bid. For the ordinary route into ownership, with disclosures, financing conditions, and the ability to actually inspect a property first, browse current listings on TorontoProperty.ca instead.
Whether you’re trying to stop a tax sale or considering bidding on one, the right next step depends entirely on where you stand. An owner facing a tax arrears certificate should contact the City’s tax office to confirm the exact cancellation price, and speak with a real estate or municipal lawyer for anything beyond paying it. A buyer interested in the specialized, higher-risk route a tax sale represents can browse Toronto’s own listed tax sale notices directly through the municipality, or browse current, market-listed Toronto properties for the ordinary route into ownership, with full disclosures, a financing condition, and the chance to actually see what you’re buying. See the rest of our guides for everything else a Toronto purchase or sale involves.