September 30, 1999
To: Administration Committee
From:W. A. Liczyk
Chief Financial Officer & Treasurer
Subject:Establishing a Scale of Costs for Proceedings Under Municipal Tax Sales Act
Purpose:
This report recommends the establishment of a scale of costs associated with proceedings under the Municipal Tax Sales
Act, 1990.
Financial Implications:
None.
Recommendations:
It is recommended that:
(1)The charging of costs in accordance with the Scale of Costs attached as Schedule 'A' hereto be approved;
(2)By-Law #32590 of the former City of North York and By-Law #1994-128 of the former City of Etobicoke be
repealed;
(3)Authority be granted for the introduction of the necessary Bills in Council; and
(4)The appropriate City officials be authorized and directed to take the necessary steps to give effect to the foregoing.
Background:
Municipal tax sales can occur once any part of three years of taxes are in arrears (for lands with a building) or any part of
two years for vacant land. The Municipality must follow specific requirements and steps as identified in the Municipal Tax
Sales Act.
Tax sales proceedings are only commenced after all other collection efforts have been exhausted. If unable to achieve a
firm, suitable repayment plan to address the arrears of taxes, staff proceed with the steps as outlined in the legislation to
collect upon the tax arrears. The debtor has one year from the date of registering a tax arrears certificate on title of the
property, to pay all of the taxes levied, any interest/penalties and costs. Failing payment within that one year, by any of the
interested parties, or the entering into of an extension agreement, where the Treasurer is satisfied that the legislation has
been substantially complied with, the City is required to proceed with advertising the property for sale.
The steps taken leading into and through the registration process include:
1)review by manager to ensure all collection efforts have been exhausted,
2)prepare and register a tax arrears certificate,
3)prepare and send notice of registration to owner(s) and all interested parties,
4)prepare and register the statutory declaration (shows step 3 above was complete),
5)after 280 days from registering the tax arrears certificate, send a final notice to all interested parties,
6)prepare and execute a statutory declaration, which does not need to be registered, (shows step 5 above was
complete), and
7)prepare and execute a cancellation certificate (after the sale).
Additional steps taken, but which are not prescribed by the legislation, are site visits that are done prior to registration
proceedings being commenced, as well as approximately one month prior to the expiry of the one year period. Proceedings
under this Act are reviewed carefully by the senior finance staff, after direct involvement by a registration collection person
and supervisor prior to registering of any documents to ensure that all collection efforts have been reviewed. The assigned
collector and supervisor attend to the premises prior to proceeding as a last attempt to make arrangements. If not able to see
the property owner, they leave a card advising of the reason for their visit and to contact our office by a certain date.
Discussion:
The Municipal Tax Sales Act allows for the tracking of the municipal costs, by either actual costs incurred, or by
establishing a by-law, fixing a scale of costs, being a reasonable estimate of the costs to the municipal of the tax sale
process. Administratively, by establishing a Scale of Costs by-law, at any given time, the exact costs are on a file, as well
as before proceeding, what the anticipated costs will be.
A review of the practices of the former municipalities regarding the use of a by-law to set out the fees allowed to be
charged for proceedings under the Act or by charging out at actual costs was conducted by both the legal and finance
departments. It was determined that it was more fair and equitable to charge a standard fee for any account registered under
the Act. A property owner will know up front what the cost exposure is and it is administratively a faster process to track
the costs. In determining standard fees, it was necessary to estimate the average preparation time multiplied by the average
staff cost. As such, the attached Schedule sets out the scale of costs that reflects a recovery of the costs incurred for each
legislatively required notice.
At this time, we have roughly1,200 accounts, or approximately 0.2% of our total accounts billed annually, being
approximately $79 million where we could have started proceedings under the Act on January 1, 1999, where we are still
attempting suitable repayment plans, or proceeding with registration of a tax arrears certificate. At present roughly 10% of
the accounts where a tax arrears certificate could have been registered on January 1st, 1999 have had a certificate registered
on title. Of the balance, roughly 50% we have reached a firm suitable repayment plan, or have received payment in full.
The remaining 40%, we are still attempting collections, and have requested a title search on the property, which is required
prior to registration of a tax arrears certificate.
The former Borough of East York used outside legal firms to conduct their registration proceedings, and charged their
registration accounts at actual costs. Former Scarborough did not proceed to register accounts. Toronto used inside counsel,
however did not establish a by-law, so also charged their fees at actual costs. Etobicoke and North York had a by-law
passed which set out the fees. York used inside counsel and charged a flat fee. A summary of the fees as set by by-law and
the proposed fees is attached. The fees, upon payment by the debtor, are credited to the legal and finance department
accounts, based upon their respective costs as used to determine the proposed fee as set out in 'Schedule A'. The existing
by-laws were established in 1994 for Etobicoke and 1995 for North York.
For an average registration under the existing fee structures and the proposed fees as set out in 'Schedule A', the results
would be as follows:
These costs are incurred only by those taxpayers that have an improved property where the taxes are in arrears for three
years or more or vacant land where the taxes are in arrears for two years or more and who have failed to make suitable
arrangements for the repayment of these outstanding taxes. These costs are added once proceedings have commenced to
collect upon the realty tax arrears, pursuant to the provisions of the Municipal Tax Sales Act. Proceedings under this Act
are only commenced once all other methods of collection have failed to make suitable repayment plans of the arrears of
taxes.
Once we have commenced proceedings, a tax arrears certificate is registered against the title of the property. The property
owner has one year from the date of this registration to pay all outstanding taxes, interest and penalties, and any fees
associated with the process. Failing to receive payment within this one year period, the City may advertise for sale the
property, by public tender or public auction. For municipalities that proceeded with registration of accounts under this
legislation, the public tender process was used. If there was a successful bid, then the amount bid must be paid within 14
days. If there is no successful bid, then the property vests in the municipality's name.
A review of the two methods of charging the respective fees to an account registered under the Municipal Tax Sales Act
was conducted by the legal and finance departments. It was determined that establishing a scale of costs by-law, for the
recovery of associated costs would be the most fair and equitable option for our customers. These costs are set out in
Schedule "A" attached.
Margo L. Brunning,
W. A. Liczyk
