Can You Sell a Home in Ontario With Property Tax Arrears?

Falling behind on property taxes is stressful, and it's common for sellers in that position to assume it means they can't sell until the debt is cleared. In most cases, that's not how it works. Property tax arrears don't have to be paid off before you list your home — but they do need to be dealt with, directly and specifically, as part of your closing.

Here's how tax arrears actually get resolved when an Ontario home is sold, and what sellers should do to avoid last-minute surprises.

Yes, You Can Usually Sell — the Arrears Get Resolved at Closing

Unpaid property tax attaches to the property, not just to you personally, so a buyer's lawyer will always want confirmation of exactly what's owing before closing. In the ordinary case, the arrears are simply paid out of your sale proceeds at closing, the same way an existing mortgage is paid out and discharged. As long as there's enough equity in the sale to cover what's owing, arrears alone typically don't block a sale from happening.

How Arrears Surface During a Sale

• The tax certificate. As part of standard due diligence, the buyer's lawyer requests a tax certificate or tax statement from the municipality confirming the current amount owing, including any arrears.
• The statement of adjustments. Your lawyer builds the arrears into the closing statement of adjustments alongside the regular pro-rated share of the current year's property tax.
• Title review. In some cases, a municipality may have registered a formal notice related to unpaid taxes, which a title search can reveal.

Who Pays, and When

At closing, arrears are typically deducted from your sale proceeds before you receive the balance — the same mechanism used to pay out and discharge an existing mortgage. You don't generally need to find the money separately in advance; it comes off the top of what the sale otherwise would have paid you.

The complication arises only when the arrears (combined with any mortgage balance and other registered charges) come close to or exceed what the sale will generate. That situation needs early attention from your lawyer, not a plan to "figure it out at closing."

If Arrears Are Left Unresolved for a Long Time

Property tax arrears that go unaddressed for an extended period can eventually lead a municipality to take formal collection steps against the property, up to and including a process that can result in the property being sold to recover the debt. Most sellers resolve arrears well before a situation reaches that stage, simply by selling or refinancing — but it underscores why arrears shouldn't be ignored, even if a sale isn't imminent.

Checklist for Sellers With Property Tax Arrears

• [ ] Request a current tax certificate or account statement from your municipality as soon as you decide to sell.
• [ ] Tell your real estate lawyer about the arrears when you retain them — not during closing week.
• [ ] Budget for the arrears (plus any accrued penalty or interest, which varies by municipality — verify the current amount directly) to come off your sale proceeds.
• [ ] Ask your lawyer to confirm the arrears are fully paid, and any related registration cleared, as part of closing.
• [ ] If your equity may not cover the arrears plus your mortgage, raise this with your lawyer immediately.

Frequently asked questions