County of Kings holding property tax sale through public tender process
It’s been handled through a public auction in the past but the County of Kings is trying a different method this year to recoup outstanding property taxes.
Because of gathering limitations imposed due to COVID19, municipal staff explored alternatives to the traditional public tax sale auction. A motion was passed by council Dec. 1 authorizing staff to proceed by means of a public tender process instead.
An auction or public tender are the two methods outlined by the Municipal Government Act (MGA) for municipalities to collect outstanding property taxes.
In a Feb. 11 presentation to council about the 2021 property tax sale, revenue manager Scott MacKay said approximately 300 delinquent tax accounts were brought up to date through this year’s process.
He said staff consistently reaches out to people with properties on the tax sale list in an effort to minimize the number of properties being put up for tax sale.
“A tax sale should be seen primarily as a deterrent to tax account delinquency,” MacKay said.
He said approximately 25 properties remained on the list as of Feb. 11. In a typical year, there would be 35 or 40 at this point.
The municipality usually holds its tax sale via public auction in early March. Last year, the sale was held in the council chambers and drew approximately 110 people.
“It’s our intention to go back to a public auction setting for future years once the pandemic is behind us,” MacKay said.
AVOIDING THE DOWNFALLS
A public tender process would avoid several challenges arising from a live or virtual public auction and MacKay said it would be a “responsible measure” considering the pandemic. Municipal staff plan to live stream the opening of the tender bids on the morning of March 3.
MacKay said one alternative that could have allowed a live auction to be held as usual would be to use a larger venue. However, uncertainty over gathering limits made this a difficult option to commit to.
Today, for example, the fully-opened council chambers could hold 91 people considering its size and current gathering limitations. MacKay said this could change on short notice with an increase in COVID-19 cases.
Staff investigated holding the sale virtually but this option also has potential downfalls. Not everyone has reliable internet service. Poor connectivity could limit participation or lead to potential legal issues. MacKay said website capacity on the municipality’s end could also present challenges in this situation.
CONSIDERING PAYMENT
With a tax sale, the MGA stipulates that the purchaser must immediately pay the lesser of the purchase price or the taxes, interest and expenses for which the property was sold. Payment must be made with cash, certified cheque, money order, bank draft, irrevocable letter of credit or lawyer’s trust cheque.
MacKay said it would be next to impossible to abide by these requirements with a virtual auction. He pointed out that e-transfers and bank accounts often have daily limits imposed, so it’s possible that these payment options wouldn’t work.
MacKay said they sought legal advice with regard to payment options for the tender process. With the March 3 tax sale, a buyer must pay the tender price within three business days of being notified that they are the successful purchaser.
MacKay said funds raised through a tax sale that are in excess of the outstanding tax balance on a given property are often paid out to previous property owners through orders of the Supreme Court of Nova Scotia.
Because of this, there is no financial benefit to the municipality to have properties sell for amounts greater than the taxes owed.
Unclaimed surplus funds must be held in a tax sale surplus account for 20 years before being transferred to the municipal capital reserve fund. MacKay pointed out that the two previous annual transfer amounts were less than $2,500.
MacKay said several other municipalities across the province are also using the tender process for this year’s tax sale. Some have experienced greater participation. Perhaps this is because there is no “intimidation factor” as there could be with a public auction.
He said some municipalities have also reported that properties that typically wouldn’t sell at a public auction have a tendency to get picked up through the tender process.
OPEN TO NEGOTIATIONS
Mayor Peter Muttart said there are always people who don’t pay their tax bills, for any number of reasons, but the municipality typically doesn’t bother them unless they’re two years in arrears.
The municipality is always willing to discuss payment arrangements to help keep properties off the tax sale list.
Muttart said they consider a tax sale as a last resort, particularly in the midst of a pandemic.
Muttart said if a property that goes up for tax sale doesn’t sell, the usual reason is that it isn’t of any value to anyone or it’s a liability to someone. In this situation, the municipality could simply take it off the tax sale list.
If it is a usable property or of value to an adjacent property owner, for example, the municipality could move it to the next tax sale or purchase it themselves and deal with it later.
Muttart said that when municipality gives notice that a property with a house on it is going to be sold for taxes, they often find out that a mortgage company is involved. The mortgage company usually steps up and pays the bill so that it can attempt to recoup the mortgage.
“A property tax lien comes ahead even of a mortgage, so mortgage companies tend not to want the property to be sold out for taxes when they have a whole mortgage that needs to be paid,” Muttart said.
For more information on the upcoming County of Kings tax sale by public tender, visit www.countyofkings. ca.