Property tax arrears represent a growing concern for both homeowners and municipalities across Canada. As the cost of living rises and economic uncertainty looms, more individuals are finding it difficult to keep up with property tax payments.
Unpaid property taxes can lead to penalties, interest, liens, and even foreclosure. However, there are ways to resolve and avoid these outcomes. In this comprehensive guide, we will explore what property tax arrears are, the potential consequences, and most importantly, how you can resolve them and regain control of your finances.
Understanding Property Tax Arrears: What it is?
Property tax arrears occur when a homeowner fails to pay their property taxes by the due date. These taxes are levied by municipal governments and fund essential public services, such as infrastructure, education, emergency services, and public spaces.
In most Canadian municipalities, property taxes are due either annually or in installments throughout the year. If these payments are missed or left unpaid, the overdue amount is classified as “arrears”. This means the homeowner now owes back taxes and could face penalties, interest charges, and eventually more serious consequences.
A recent survey has revealed how Canadian homeowners struggling to keep up with their property tax payments. In 2023, Federation of Canadian Municipalities (FCM) published a report highlighting the rise in property tax arrears due to economic pressures like the COVID-19 pandemic, inflation, and rising interest rates. Their survey covered various municipalities across Canada, focusing on how local governments are handling the increasing arrears rates.
Common Causes of Property Tax Arrears
Several factors can contribute to a homeowner’s inability to pay property taxes includes:
- Economic Hardship: Job losses, reduced income, or financial instability can make it challenging to cover all household expenses, including property taxes.
- Rising Cost of Living: Inflation, coupled with increases in other household expenses like mortgage payments, utilities, and insurance, can create financial pressure that pushes property taxes down the list of priorities.
- Unexpected Expenses: Medical emergencies, repairs, or other unplanned financial obligations can deplete a household’s budget, making it difficult to cover property tax bills.
- Higher Property Values: In areas where property values have surged, tax assessments may reflect these increases, resulting in higher property tax bills. For homeowners on fixed incomes, particularly seniors, this can lead to arrears.
Primary Consequences of Property Tax Arrears:
Property tax arrears can have serious consequences for homeowners and property owners in Canada, affecting their financial stability and ownership rights. Here are some of the key consequences:
- Penalties and Interest: Unpaid property taxes typically accrue penalties and interest. The longer the arrears go unpaid, the more expensive the debt becomes, making it increasingly difficult to catch up on payments.
- Property Tax Liens: Municipalities can place a lien on a property with outstanding taxes. A lien is a legal claim against the property, ensuring that the municipality is paid from the proceeds if the homeowner sells the property. Liens take precedence over most other debts, including mortgages.
- Credit Impact: Having property tax arrears or liens on a property can negatively affect a homeowner’s credit score, making it more challenging to secure future loans or favorable interest rates.
- Tax Sales and Foreclosure: If property tax arrears remain unpaid for an extended period, municipalities can initiate tax sales or foreclosure proceedings. This means the property can be sold to recover the unpaid taxes, leaving the homeowner without their home.
How to Resolve Property Tax Arrears: Step-by-Step Guide
If you’re dealing with property tax arrears, it’s important to act quickly. Here are several options to help you resolve unpaid property taxes and avoid further financial difficulties.
- Review Your Property Tax Bill
The first step is to carefully review your property tax bill. Make sure the amount listed is accurate, including any penalties or interest charges. If you notice any discrepancies, contact your municipality’s tax office to resolve them.
- Contact Your Municipality
Many municipalities in Canada offer payment plans or other options to help homeowners catch up on unpaid taxes. Reach out to your local tax office and inquire about property tax repayment plans. These plans typically allow you to make monthly payments toward your arrears while staying current on future property taxes.
- Explore Property Tax Payment Plans
A property tax payment plan can be a lifeline for homeowners struggling to pay off arrears. These plans break down the total amount owed into manageable monthly payments, allowing you to resolve your tax debt over time without facing penalties for continued non-payment.
- Consider a Home Equity Loan or Refinancing
If you have sufficient equity in your home, a home equity loan or refinancing may provide the funds needed to pay off your property tax arrears. By tapping into your home’s equity, you can consolidate your debts—including unpaid property taxes—into a single monthly payment. Refinancing can also provide the added benefit of lowering your overall mortgage payments, freeing up cash to stay current on future taxes.
- Work with a Mortgage Broker
Mortgage brokers who specialize in bad credit or financial hardship cases can help you explore mortgage refinancing or other lending options. For example, at Turnedaway.ca, we provide flexible mortgage solutions tailored to homeowners facing income challenges, bad credit, or property tax arrears. We can help you find the right loan to resolve your property tax burden and avoid foreclosure.
- Investigate Government Property Tax Relief Programs
In some cases, provincial or municipal governments offer property tax relief programs to help homeowners in financial distress. These programs may offer deferrals, reductions, or forgiveness for eligible homeowners. Check with your local tax office to see if you qualify for any government property tax relief.
- Negotiate Your Tax Debt
If you’re unable to pay your property tax arrears in full, you may be able to negotiate with your municipality for a reduced payment or an extended repayment period. This approach works best when you can demonstrate financial hardship, and it may prevent further penalties from accruing.
Real-Life Example: Resolving Property Tax Arrears
John’s Story: John, a homeowner in Ontario, faced financial difficulties after losing his job and falling behind on his property taxes. With interest charges piling up, John feared he would lose his home to foreclosure. After contacting his municipality, John was able to enter a property tax repayment plan, which allowed him to pay off his arrears in monthly installments. Additionally, John worked with a mortgage broker to refinance his home, consolidating his debts and lowering his overall monthly payments. By acting quickly and seeking help, John successfully resolved his property tax arrears and saved his home from foreclosure.
How to Avoid Property Tax Arrears
The best way to avoid property tax arrears is to stay organized and proactive. Here are a few tips to help you avoid falling behind on your property taxes in the future:
- Set Up a Budget: Create a budget that accounts for your property taxes, ensuring you have the funds set aside when they are due.
- Set Up Automatic Payments: Many municipalities offer automatic payment options, which can help you stay on track with your payments.
- Consider Pre-Authorized Debit: Pre-authorized debit plans automatically withdraw your property tax payments from your bank account, making it easier to stay current.
- Monitor Your Taxes Regularly: Keep an eye on your property tax bills and payment schedules to avoid surprises.
Call to Action: Get Help with Property Tax Arrears Today
If you’re struggling with property tax arrears, don’t wait until the situation worsens. At turnedaway.ca, we specialize in helping homeowners with bad credit, income challenges, and financial difficulties find real solutions. Whether you need help resolving your tax arrears or exploring mortgage refinancing options, we’re here to guide you. Contact us today for a consultation, and let’s work together to protect your home and financial future.
By following the steps outlined above, you can resolve your property tax arrears and regain control of your finances. Visit turnedaway.ca for more information on how we can help.
