In most cases in our area, property taxes are payable to the applicable taxation authority (City, District, Municipality, etc.) in the middle of the year (on the specified date for each jurisdiction) for the entire calendar year. For example, property taxes payable in July 2018 will cover property taxes from January 1, 2018 through December 31, 2018. Accordingly, when a property is purchased an adjustment must be made to ensure that the Buyer and seller are only responsible for the property taxes payable with respect to the portion of the year that they own the property.
If a property is sold before the property tax due date, the property taxes will normally be outstanding and will be the responsibility of the Buyer to pay when they come due. At the time of closing, the Seller will provide the Buyer with a credit equivalent to the Seller’s share of property taxes for the portion of the year that the Seller owned the property. If the actual property taxes payable are not known (ie. the property tax notice has not been issued by the applicable taxation authority), the Seller’s pro-rated share of the property taxes will often be based on the previous year’s property taxes plus 5% or some other agreed upon amount as the estimated annual increase in property taxes.
If a property is sold after the property tax due date, the property taxes will normally be paid in full (including penalties, if any) by the Seller. At the time of closing, the Buyer will provide the Seller with a credit equivalent to the Buyer’s share of the property taxes for the portion of the year that the Buyer will own the property. In this scenario, the actual property taxes payable for the year. Accordingly, there is no need to estimate the annual increase in property taxes for the property as they would be known at that time.
The adjustments will also take into consideration the amount of pre-paid property taxes and/or a homeowners’ grant claimed or to be claimed, if applicable.
The adjustment will be found on the Buyer’s Statement of Adjustments and Seller’s Statement of Adjustments. In the first scenario (ie. the property is sold before the property tax due date), the Buyer will get a credit and the Seller will get a debit. In the second scenario (ie. the property is sold after the property tax due date), the Seller will get a credit and the Buyer will get a debit. In other words, no separate sum of cash changes hands between the parties but the amount payable to the Seller by the Buyer will be impacted.
Property taxes are generally payable in July but the specific due dates vary between taxation authorities. We recommend that all homeowners make the necessary inquiries to ensure that you are aware of the applicable property tax due date and that payments be remitted to the applicable taxation authorities prior to such date (if necessary) to avoid penalties for late payment.
If you have any questions with respect to the above, please do not hesitate to reach out to one of our lawyers practicing in the area of real estate law. If you have questions about your property taxes or due dates, please contact the applicable taxation authority. Some helpful links are provided for your convenience:City of Kelowna – https://www.kelowna.ca/homes-building/property-taxes City of West Kelowna – http://www.districtofwestkelowna.ca/164/Property-Tax District of Lake Country – http://www.okanaganway.ca/municipal/municipal-services/property-taxes/ District of Peachland – http://www.peachland.ca/property-taxes City of Vernon – https://www.vernon.ca/homes-building/taxes-grants/property-taxes City of Penticton – http://www.penticton.ca/EN/main/departments/finance/property-taxes.html Osoyoos – http://www.osoyoos.ca/content/property-taxes
Author: Danielle (Dani) Brito
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate law at the following: