Have you purchased real estate in 2018? If so, we recommend that you make the necessary inquiries to ensure that you are aware of your obligations with respect to property taxes.

Property taxes are payable to the applicable taxation authority (City, District, Municipality, etc.) in the middle of the year (generally, early July) for the entire calendar year.  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 continue to be outstanding and payment will be the responsibility of the Buyer to pay when they come due. At the time of closing, the Seller provides 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 are often based on the previous year’s property taxes plus 5% or some other agreed upon amount as the estimated annual increase in property taxes. Please note that the adjustment will take into consideration the amount of pre-paid property taxes and/or a home owners’ grant claimed, if applicable.

The adjustment will be found on the Buyer’s Statement of Adjustments and Seller’s Statement of Adjustments – the Buyer will get a credit and the Seller 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. The Buyer may also be required by their lawyer or notary to sign an acknowledgement with respect to their obligation to pay the property taxes in full when payable.

We recommend that all home owners 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. Further, if you do not know the amount of the property taxes payable (ie. you have not received a property tax notice for the applicable taxation authority or the Seller) we recommend that you contact the applicable taxation authority to determine the actual amount payable.

Please note that, depending on your particular situation, your lender may be attending to payment of your property taxes on your behalf. In this case, you may simply claim the home owners’ grant (if you qualify).

If you recently purchased your property (within the past 30 days), we recommend that you take a copy of the registered Form A Transfer to the taxation authority’s office to evidence that you are the registered owner of the property. It is our practice to provide you with a copy of the registered Form A Transfer in your reporting package following the completion of your transaction.

If you have any questions with respect to the above, please review our blog article titled “Adjusting for Property Taxes” and 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:

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: