Property tax is charged to the property for the whole year, but two people own it in the year of a sale. The statement of adjustments divides the bill. Get it wrong and a buyer pays for months they did not own, or inherits arrears that ride with the land.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $1,354.87 taxes included
The principle is simple: the seller pays for the period up to closing, the buyer pays from closing, and under most Ontario agreements the day of completion itself belongs to the buyer. Whether money moves toward the buyer or the seller depends only on what has already been paid. If the seller prepaid past the closing date, the buyer credits the seller. If instalments are outstanding, the seller credits the buyer.
Your lawyer does not take the seller's word for the balance. A tax certificate is ordered from the municipality, and it confirms the annual levy, what has been paid, what is outstanding, and whether anything unusual sits on the roll. That certificate is the number used on the statement of adjustments, because unpaid realty tax is a lien on the land and follows the property to its new owner.
Timing complicates it. Municipalities send an interim bill early in the year based on the previous year's taxes, then a final bill once the current rate is set. A closing between the two is adjusted on an estimate, and the estimate is usually low if rates rose. Read your agreement for a readjustment clause, because if there is none, the estimate is simply the answer.
Two practical steps get missed. A seller on a pre-authorized payment plan has to cancel it, or the municipality keeps drawing from an account for a property they no longer own. And where a lender collects taxes with the mortgage payment, the buyer's lender may require the account be current at closing or hold back funds until it is satisfied.
A newly built house is assessed as vacant land until the assessor catches up. When the assessment is finally issued, the municipality sends a supplementary or omitted tax bill covering the period back to occupancy, sometimes reaching into a previous year. New home buyers routinely receive one long after closing and assume it is an error. It is not.
The same happens after a substantial addition, a converted building, or a property that loses a tax exemption. The bill covers a retroactive period, which may include months the seller owned the home. Realty tax attaches to the property, so the municipality sends it to whoever owns the land when it is issued, and leaves the two of you to sort out who should bear it.
This is why the agreement matters more than the arithmetic. A clause requiring the seller to pay their share of any supplementary assessment, and to remain liable after closing, is worth insisting on when you buy new construction or an assignment. Without it, a buyer has a claim in principle and a person to chase in practice, which is not the same thing.
Where a supplementary bill is expected, ask your lawyer about a holdback. Money retained in trust against a known future bill is far easier than recovering it from a seller who has moved provinces. It is also a reason to keep the closing file, since you will need the closing date and the adjustment when the bill lands two years later.
Realty tax is one line among several. Water and utility accounts are adjusted on final readings; in many municipalities unpaid water charges can be transferred to the tax roll, which turns a utility debt into a lien on the property. Local improvement charges for sidewalks, sewers or road work can also sit on the roll for years and are adjusted, or assumed, depending on what the agreement says.
Condominium common expenses are adjusted from the status certificate, along with any special assessment already levied. Rented properties add rent for the month, prepaid rent, and the last month's rent deposit with its accrued interest under the <a href="https://www.ontario.ca/laws/statute/06r17">Residential Tenancies Act, 2006</a>. Fuel oil or propane left in a tank is usually adjusted on a dealer's reading taken close to closing.
Several Ontario municipalities now levy a vacant home tax that depends on an annual occupancy declaration. A missed declaration can produce a charge on a home that was never vacant, and an unpaid charge can end up on the tax roll. Buyers should ask for proof the seller filed, and sellers should not assume the sale relieves them of a declaration for the year.
Once closing is done, your lawyer notifies the tax department of the ownership change so future bills go to the right address. If a readjustment is needed, raise it promptly, since agreements typically set a deadline for correcting errors. We publish a flat fee for residential transactions, currently $1,354.87 with taxes included, with disbursements such as tax certificates billed at cost; see <a href="/pricing">pricing</a> and <a href="/real-estate">real estate</a>.
Under most Ontario agreements of purchase and sale, the day of completion is allocated to the buyer, so the seller is charged to the day before. It is a one-day difference and rarely worth arguing about, but it is set by the agreement rather than by law, so your lawyer reads the clause rather than assuming.
The adjustment is made on an estimate, usually based on the interim billing or the prior year's total. If rates went up, the estimate is low and someone is short. Check whether your agreement allows a readjustment once the final bill issues, and if it does, calendar the deadline, because these clauses are usually time-limited.
Probably. New homes are taxed as vacant land until the assessment is updated, then a supplementary bill catches up the difference back to occupancy. If part of that period predates your closing, the seller's share is a matter for the agreement. Send the bill to your lawyer with your closing documents rather than paying it and forgetting it.
Yes, which is why the certificate matters. Municipal realty taxes are a lien on the land with priority, so they follow the property rather than the person. Your lawyer orders a tax certificate, adjusts for anything outstanding, and where necessary pays the arrears directly from closing funds instead of trusting an undertaking.
Your lawyer sends the change of ownership to the tax department after closing so the bills come to you, but confirm it happened. Buyers who never receive a bill still owe the tax, and penalties accrue on the roll regardless. Set up your own account with the municipality rather than waiting for paper to arrive.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.