Establishing a Scale of Costs for

Proceedings Under Municipal Tax Sales Act

The Administration Committee recommends the adoption of the following report (September 23, 1999) from the Chief Financial Officer and Treasurer:

Purpose:

This report recommends the establishment of a scale of costs associated with proceedings under the Municipal Tax Sales Act, R.S.O. 1990 c. M. 60.

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(2)By-law No. 32590 of the former City of North York and By-law No. 1994-128 of the former City of Etobicoke be repealed;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 proceedings can commence once taxes have been in arrears for three years (for lands with a building) or two years for vacant land. The Municipality must follow specific requirements and steps as identified in the Municipal Tax Sales Act (the "Act").

It is Finance Department policy that tax sales proceedings are only commenced after all other collection efforts have been exhausted. If staff are unable to achieve payment or a firm, suitable repayment plan to address the arrears of taxes, they proceed with the steps as outlined in the Act to collect the tax arrears. The debtor has one year from the date of registration of a tax arrears certificate on title of the property, to pay the cancellation price which includes all of the taxes levied, any interest/penalties and costs. Failing payment within that one year, 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 a public sale of the property.

Among the steps taken leading into and through the registration process for an average registration are:

(1)review by manager to ensure all collection efforts have been exhausted;

(2)conduct a search of title to the property;

(3)prepare and register a tax arrears certificate;

(4)prepare and send notice of registration to owner(s) and all interested parties;

(5)prepare and register the statutory declaration (shows step 3 above was completed);

(6)within 30 days after 280 days from registering the tax arrears certificate, send a final notice to all interested parties;

(7)prepare and execute a statutory declaration, which does not need to be registered, (shows step 4 above was completed); and

(8)if payment is received, prepare and execute a cancellation certificate.

Additionally, although not prescribed by the legislation, staff attend at the property to try to speak with the owner and if unable to make contact, speak with neighbours to determine the whereabouts and situation of the owner. At the time of their attendance, if staff are able to talk with the debtor, they advise of the next steps that will be taken if no suitable payment arrangements are made. In addition, they observe the property looking for any environmental concerns. Proceedings under the Act are reviewed carefully by senior finance staff.

Discussion:

Section 15 of the Act allows for the charging of the municipal costs incurred in the tax sales process, by either tracking actual costs incurred, or by establishing a by-law, fixing a scale of costs, being a reasonable estimate of the costs to the municipality of the tax sale process. Administratively, by establishing a Scale of Costs by-law, at any given time, it is possible to advise interested parties as to the exact costs are on a file. As well, before proceeding, we can anticipate what the 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 actual costs was conducted by both the legal and finance departments.

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 by-laws 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.

It was determined that it was more fair and equitable to charge a standard fee for any account for which a tax arrears certificate was 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 stage of the process.

A comparison of the average costs charged up to the time of registration of a cancellation certificate under the existing fee structures and the proposed fees as set out in 'Schedule A', is set out in the following table:

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 form part of the cancellation price once proceedings have been commenced to collect upon the realty tax arrears, pursuant to the provisions of the Act.

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 the cancellation price. Failing payment being received by the City within this one year period, the City must conduct a public sale of the property. If there is a successful purchaser then the amount bid must be paid within 14 days. If there is no successful purchaser then the property vests in the municipality upon registration of a Notice of Vesting.

On January 1, 1999, we had roughly 1,200 accounts, or approximately 0.2 percent of our total accounts billed annually, being approximately $79 million, where we could have started proceedings under the Act. At present, roughly 10 percent of the accounts where a tax arrears certificate could have been registered on January 1, 1999 have had a certificate registered on title. Of the balance, in roughly 50 percent of cases, we have reached a firm suitable repayment plan, or have received payment in full. For the remaining 40 percent, we are still attempting collections, and have requested a title search on the property, the initial step leading to registration of a tax arrears certificate.

Conclusion:

A review of the two methods of charging the respective fees with respect to proceedings under the Act was conducted by the legal and finance departments. It was determined that by establishing a scale of costs by-law, it would be possible to establish a system for cost recovery which is both fair and equitable to the taxpayer and relatively straightforward to administer. The proposed costs are set out in Schedule 'A' attached.

Contact Name:

Margo L. Brunning,

Manager, Collections/Receivables, Payments

and Regional Customer Services

Phone: (416) 395-6789

Fax: (416) 395-6703

Internet Email Address: mbrunnin@toronto.ca

Mary Ellen Bench,

Solicitor

Phone: (416) 392-7245

Fax:(416) 392-1017

Internet Email Address: mbench@toronto.ca

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Schedule "A"

Proposed Scale of Costs pursuant to Section 15 of the Municipal Tax Sales Act R.S.O. 1990, c.M.60

The Scale of Costs to be charged shall be:

Registration of Tax Arrears Certificate$250.00Plus actual costs of title search and execution search costs

Preparation and Notice of Registration$25.00each notice sent

Preparation and Registration of Statutory Declaration$125.00

Preparation and Registration of

Tax Arrears Cancellation Certificate$150.00

Preparation of Extension Agreement$250.00

Preparation of Final Notice$25.00each notice sent

Preparation of Notice re Advertisement for Public Sale$25.00each notice sent

Sale by Public Tender$300.00

Preparation and Registration of

Tax Deed or Notice of Vesting$175.00

Payment into Court and Statement of Facts$100.00

Payment out of Court$450.00

Charges for Surveys, Advertising, Soil Testing,Actual Cost

Preparation and Placement of Placards

Farm Debt Review Board$25.00

Registered Mail CostsActual Cost

Registration File FoldersActual Cost

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Comparison of Existing Fees for Proceedings

Under Municipal Tax Sales Act