Are you as excited as we are to dig into Part 2 of our 'To Bid or Not to Bid, That is the Questions' article?
We trust you must have a few questions by now and we know it can be very difficult fumbling around in the dark. Hopefully we can shed some light on these problem areas for you.
In our previous article we mentioned that in part 2 we would be covering topics such as title searches, execution and writ searches, statutory declarations and drive by viewing of properties (when possible).
Without further ado, lets start with title searches. If you're not already familiar with the huge importance of searching a properties title prior to submitting a tender, we're going to explain exactly why this is one of the most important steps in researching a tax sale property.
Let us paint a quick picture for you; You've found a beautiful home sitting on some prime acreage, just outside of the City. Now, imagine you have just submitted a tender on this property without searching title or performing an execution search first. You've gone ahead without doing your due-diligence, assuming you're in the clear and submitted your tender without giving it a second thought. The tax sale has just completed and you have been deemed the highest tenderer. As a matter of fact, you were the ONLY person to submit a bid at all. Weird... For such a beautiful property in such a sought after location, you'd think there would have been more interest. If alarm bells aren't sounding now, they should be. The sound should be deafening. Next thing you know you're hearing murmurs down the grape vine of another investor making a classic rookie mistake. It might sound something like this... "Did you hear about the property in so and so? Someone actually bought it!!! I feel bad for them. I wonder if they knew about those crown interests..." and all the sudden it clicks... You're the rookie, you're that someone.
Keep in mind, crown interests are not going to be eliminated by way of a tax sale in the same way that an interest in favour of the Toronto Dominion Bank would be. These are here to stay until the crown gets what they're after. Now, it is important to note that you are not actually responsible for paying a judgement in favour of the crown if you are deemed the highest tenderer and the property is transferred to you. However, what they CAN do is seize and sell the land to recover these amounts, right from under your feet, leaving you absolutely zero recourse.
This can go a few different ways now that you've been deemed the highest tenderer.
Firstly, you could contact the crown agency listed on the related instrument and inquire as to what the current amounts are outstanding on these interests, should you decide to attempt to pay these amounts. In some cases these can be relatively small costs and in other cases these interests can push into the millions. So, really it depends on what you are financially able to invest into a property and more importantly, whether it would be in your best interests.
Secondly, and assuming you have not completed payment of your submitted tender and the tax deed has not yet been registered, you could walk away from your 20% deposit. A difficult choice, however, in some cases this may be your best bet to mitigate any damages.
If payment has been completed, the property has been transferred and title is officially in your name, it will not be as simple as forfeiting your deposit and admitting defeat. At this stage, you're in it... at least knee deep and sinking fast. Moving forward it would be a case by case scenario as there are several variables that come into play.
If you are unfortunate enough to find yourself in a situation resembling this one, your very first move should be to contact the crown agency to determine what your options are, if any. In some cases these amounts might have been paid down substantially since the initial registration and in others, quite the opposite. Explain your situation and attempt to discuss with crown agency, either having the amount lowered, eliminated or the possibility of coming up with a payment arrangement if this a cost you are able to cover and are comfortable moving forward with. They are not obligated to provide any leniency in these situations, so the phrase, "You get more bees with honey" will stand true to its roots. If you ignore these amounts and do not contact the crown agency, the property could be seized, as mentioned above.
Now, this is only an example of the risks of purchasing a tax sale property without thoroughly researching your investment in advance. The financial burdens could be massive. When it comes to obtaining a title search, it is a small price to pay in an effort to safe guard yourself from problems of a much larger magnitude.
Next on our list of discussion topics are execution searches. Some folks will go to great lengths to obtain a title search and completely skip the execution search. We do not recommend that. When preparing title search reports, our team will perform an execution search in addition to pulling the parcel register. The difference between a parcel register and an execution search is simple. The parcel register is related to the property, while the execution search is related to the registered owners of the property. If there have been judgements on the registered owner in favour of a lender, crown agency, etc., these will show up when performing an execution search and are referred to as 'writs'. If there happen to be any writs filed against a registered owner of a property that are in favour of the crown it is important that potential purchasers are aware of these for the same reason as crown interests that are registered on title.
For those of you who are not familiar with our products, specifically our title search reports, they include information such as:
1. The Parcel Register(s)
2. An Execution Search on the registered owner(s)
3. Copies of active instruments registered on title.
- The most recent transfer registered on title
- Easements and rights-of-way (if any)
- Restrictive covenants (if any)
- Mortgages, Liens, etc. (if any)
- Crown Interests (if any)
- Reference Plans (if available & upon request)
All of this information will be included in an easy to understand report, outlining any interests that will continue to affect the land after a tax sale.
We even include a copy of our Tender Submission Requirements Checklist to assist you with submitting a valid tender.
If you have any questions regarding our title search reports or updated title search reports, email our office at email@example.com, we would love to hear from you.
Now, while a title search doesn't cover every single aspect of property research you should be doing before submitting a tender, it's a very affordable and extremely important step in performing a thorough investigation of a tax sale property.
Our next discussion topic today is, Statutory Declarations. These are documents that are required under the Municipal Act, 2001, for those properties that are making their way through the tax sale process for non payment of property tax arrears. The purpose of a statutory declaration is to declare that correct notice was sent to the parties noted on the document, in accordance with the laws set forth by the Municipal Act, 2001. Generally these will only include interests that were registered on title or had been present in the database of writs at the time the tax arrears certificate was registered. Statutory Declarations can be somewhat handy in the sense that if you are curious about what interests were registered on title at the time the tax arrears certificate was registered all you need to do is to request the municipality allow you to view this document. Under Section 379 Subsection 12 of the Municipal Act, 2001, "The treasurer, on the request of any person, shall permit the person to inspect a copy of the statutory declaration made under clause (2) (a) and shall provide copies of it at the same rate as is charged under section 253. 2001, c. 25, s. 379 (12)."
If you are hoping to have a copy provided, you will need to contact the municipality directly to inquire. Municipalities will oftentimes have a scale of costs for document requests like these and they generally range from $10.00 to $50.00 or more.
Lastly, we want to touch on the topic of viewing a property. This is not a traditional real estate transaction and for that reason there may be certain processes you are accustomed to that are not permitted when purchasing tax sale property.
One question we get a lot is, "How can I book a viewing?". The answer to this is simple, you cannot. These properties are still owned by the registered owner(s) of the properties and are not property of the municipality. Ownership is only transferred upon successful registration of a new tax deed. For this reason, it is important to be aware that these properties are being sold as is, where is, with absolutely no warranties of any kind. This begs the question, how do you get a feel for a property before bidding? There are several ways to research the historical use of a property, although in this case, we will stick to the classic 'drive-by viewing'. Of course, these are only possible in cases when a property is viewable from a legal stand point. Remember, accessing any private property without permission is trespassing.
Now, let's say you are interested in a property, it is always wise (when possible) to drive by and take a good look at the property from the roadside. Ask yourself questions like, are there any structures, what shape are they in, are there any surrounding properties and potential hazards that might be present on or around the tax sale property, etc.. You can save yourself a great deal of trouble by taking these simple steps in advance. Should you find yourself looking at a dilapidated and potentially animal infested, unmaintained home with missing windows and no signs of human life, you would be wise to expect that there would be substantial damage to the interior of the structure. On the other hand, maybe the property is neighbouring a laundromat, mechanics shop or maybe a former service station. While this might not seem like a potential issue at glance, contamination knows no bounds. Just because the property line lay in its path, that doesn't mean its going to stop before it reaches your property. It's important for us to mention, in some cases there may be no issue with a neighbouring property, however, in others, there could be massive implications if the adjacent lot is contaminated. It is important that you use careful judgement in purchasing any property as is.
In our next part, we will be discussing some of the consequences of not performing your due diligence prior to submitting a bid. The last thing you want to do is make a vital mistake when it could have been avoided; and trust us when we say, it happens more than you would expect. We will also be speaking a little bit about some of the things you should not be doing when researching a property or engaging in the tax sale process. If you have any questions about part 2 of this article, please email our office at info@tri-target or post a comment and we will respond to you directly.
We appreciate you reading our blog and look forward to providing you with relevant information you can utilize when purchasing tax sale property.
Stay tuned for Part 3 of "To Bid or Not to Bid, That is the Question..."