In Kelowna, British Columbia, a starting bid of $31,562 for a 10-acre lot valued at just under $5 million.
In the heart of the Comox Valley, a four-bedroom home from $12,931.
In Prince George, a mid-century rancher was listed for less than $10,000.
It’s tax cut season across British Columbia, when savvy investors can profit from the misfortune or mistakes of others.
Each year, municipalities hold an annual auction on the last Monday in September (this year the auctions will be held on the 25th) where properties with three years of unpaid taxes are up for grabs.
Bids start at the sales price, or the value of unpaid tax and other fees.
Properties are usually listed at least a couple of weeks before the auction, depending on the community bylaws of that municipality.
However, the high-stakes opportunity has been criticized as unfair and in need of improvement.
The probability of ownership “could very well be zero”
Adam Langenmaier, director of financial services for the city of Courtenay, says these high-risk opportunities rarely pan out.
“If you average the number of properties advertised in the newspaper with the actual number that comes to the property tax sale, it’s a fraction of them,” he said.
In Courtenay, the city had two properties up for auction earlier in the week. On Friday there was only one. Langenmaier says there likely won’t be any next Monday.
Owners only need to pay the first of three years of unpaid taxes to prevent the property from going up for auction, Langenmaier says, and even if it sells, they usually have up to a year to pay the taxes, plus an administrative fee and interests.
“You could buy all the properties at a tax auction in the province on the 25th and the probability of you ending up owning them could be zero,” he said.
High risk sale
Langenmaier says that in his years of experience as CFO of Courtenay and Powell River, he has only seen one property sold at a tax sale auction: a wooded lot in the middle of the bush that someone in Ontario had inherited from his great-grandfather and I had no intention of consuming.
As for the type of homeowner who lets three years of council tax accumulate on their home or business, Langenmaier says it ranges from people facing tough financial times to foreign investors and those who, for whatever reason, simply forgot to pay.
For potential investors, tax sales can be a high-risk activity.
Listed properties are offered as is and bidders are not permitted to come to the property to inspect it. It is up to them to investigate before bidding on a property to see if it might have any issues, such as environmental damage, or be subject to other conditions, such as strata laws.
Even if the bidder wins, he or she does not take possession of the property until a year after the auction.
If that doesn’t happen, if the property owner pays, the winning bidder gets back the bid price, plus interest.
Vulnerable people at risk: ombudsman
In the few cases where the sale goes through, there may be other problems.
In 2021 Provincial ombudsman Jay Chalke issued a report. called A Bid for Justice: How $10,000 in Property Tax Debt Led a Vulnerable Person to Lose Their Home.
The report highlighted the case of a Penticton woman who lost her home and hundreds of thousands of dollars in equity after the city auctioned her home in 2017 for one-third of its appraised value.
Chalke’s review found the woman, known as Mrs Wilson, had the money to pay her taxes, but health problems meant she needed help making the payments.
The report made five recommendations, including that the Ministry of Municipal Affairs develop plain language template letters for municipalities to notify homeowners, review overpricing to better reflect the appraised value of a home, and issue best practices on how to protect to vulnerable people.
The following year, the Okanagan municipality responsible for selling a man’s property at a tax auction without warning issued a public apology and said it had made “substantial changes” to its processes in the years since the sale.
Spallumcheen Township was also ordered to pay former landowner Anthony Morgan more than $350,000 for auctioning off his rural property without meeting its legal responsibilities to inform him of the 2017 sale or the steps necessary to prevent it.
