Managing the Tax Recovery Process: Administrative Practices May 2, 2017 Red Deer, AB
Practitioner Panel Member Lavinia Henderson, CLGM Civic Solutions Inc. President
Overview Managing Taxes Receivable Preparing and Filing the List Preparing for Auction Conducting the Auction After the Auction Q&A
Managing Taxes Receivable Legislation MGA s339 Incentives s340 Installments s349 Fire Insurance Proceeds s411 Methods of recovering taxes in arrears s416 Right to collect rent to pay tax arrears
Managing Taxes Receivable (con t) Divisions 8 and 8.1: Unpaid taxes are not tax arrears Section 326(c): Tax Arrears means taxes that remain unpaid after December 31 of the year in which they are imposed
Managing Taxes Receivable (con t) Objectives: Avoid tax recovery Improve cash flows Reduce stress and work
Managing Taxes Receivable (con t) Adopt: flexible payment options for current taxes proactive delinquent tax account management practices
Flexible Payment Options for Current Taxes Section 339 Incentives A council may by bylaw provide incentives for payment of taxes by the dates set out in the bylaw.
Tax Discount Bylaws - Terms Amount eligible for current prepayment Arrears paid first Prepayments non-refundable Time frame discounts allowed Discount percentage rate
Flexible Payment Options for Current Taxes (con t) Installments - Section 340(1) A council may by bylaw permit taxes to be paid by installments, at the option of the taxpayer.
Flexible Payment Options for Current Taxes (con t) Installments Section 340(2) A person who wishes to pay taxes by installments must make an agreement with the council authorizing that method of payment.
Tax Installment Payment Plans (con t) Section 340(3) When an agreement under subsection (2) is made the tax notice, or a separate notice enclosed with the tax notice, must state: (a) the amount and due dates of the installments to be paid in the remainder of the year, and (b) what happens if an installment is not paid.
Tax Installment Payment Plans (con t) Key Points to include in agreement and always review with the owner(s): Roll number of subject property Contact information of taxpayer Specific payment terms: Amount of each instalment
Tax Installment Payment Plans (con t) Date payment is due for each instalment Method of payment
Tax Installment Payment Plans (con t) What happens if an instalment is not paid Early termination o o By the municipality o Any missed or late payment by the taxpayer By the taxpayer o Sale of property
Proactive Taxes Receivable Management Start as soon as possible after the current penalty deadline Run and review Aged Trial Balance ATB) Identify and sort accounts according to priority action required
Proactive Taxes Receivable Management (con t) Priority 1 those accounts that are on an existing list Priority 2 those accounts that have arrears but are not on a list yet Priority 3 - current accounts which have been penalized
Proactive Taxes Receivable Management (con t) Priority 1 Property on an Existing Tax Arrears List Tax Agreements Section 418(4): Recovery of Taxes Related to Land Section 436.09(4): Recovery of Taxes Related to Designated Manufactured Homes DMH)
Proactive Taxes Receivable Management (con t) In order to enter into a Tax Arrears Agreement, the land/designated Manufactured Home (DMH) must first be on the municipality s tax arrears list.
Proactive Taxes Receivable Management (con t) Municipality may enter into an agreement with the owner of a parcel of land/ DMH shown on its tax arrears list The agreement may provide for the payment of the tax arrears over a period not exceeding 3 years
Proactive Taxes Receivable Management (con t) Parcel of land/dmh need not be offered for sale until: A) the agreement has expired, or B) the owner breaches the agreement, whichever occurs first
Proactive Taxes Receivable Management (con t) Key Terms to include and review with the owner(s): Name of Owner of Parcel / DMH Legal Description of the Subject Parcel Serial number of the DMH
Proactive Taxes Receivable Management (con t) o Total Amount of Tax Arrears Owing (include penalties, costs and taxes that may accrue during the Term) o Term of Agreement (not exceeding 3 years)
Proactive Taxes Receivable Management (con t) Method of payment (cash, certified cheque, EFT) Payment schedule including date and amount of payments throughout Term Acknowledgement from owner that breach of Agreement will permit Municipality to proceed with tax recovery process
Proactive Taxes Receivable Management (con t) Acknowledgement from owner that if land / DMH is sold during Term, all taxes owing together with penalties and costs are immediately due and payable
Proactive Taxes Receivable Management (con t) Early termination provisions: Breach of Agreement by owner Owner goes into bankruptcy Any other party takes legal proceedings in relation to property / DMH
Preparing and Filing the List
Preparing and Filing the List o Preparation of the Tax Arrears List s. 412(1) a municipality must annually, not later than March 31, (a) prepare a tax arrears list showing the parcels of land in the municipality in respect of which there are tax arrears for more than one year,
Preparing and Filing the List (con t) Start by running an updated ATB after the January penalty run Identify accounts which should be on the list Is there anyone on the list that you have knowledge of which may be important? Is there anyone on the list who is not normally on the list?
Preparing and Filing the List (con t) Conduct title search to: confirm owners determine any mortgage companies/ interested parties which may be involved Prepare letters and send to owners (I send a c.c. to interested parties)
Preparing and Filing the List (con t) o Preparation of the Tax Arrears List (b) send 2 copies of the tax arrears list to the Registrar of Land Titles, (b.1) send a copy of the tax arrears list to the Minister responsible for the Unclaimed Personal Property and Vested Property Act, and (c) post a copy of the tax arrears list in a place that is accessible to the public during regular business hours.
Preparing and Filing the List (con t) Municipality should complete the tax arrears list in quadrapulicate and have the designated officer or CAO sign the form and put the municipal seal on 2 copies 2 sealed copies of the tax arrears list must be sent to the Land Titles Office (South or North depending on location)
Preparing and Filing the List (con t) o An unsealed copy of the Tax Arrears List must be sent to the Minister of Treasury Board and Finance via the Unclaimed Property Program http://www.finance.alberta.ca/contactus.html http://www.finance.alberta.ca/business/u nclaimed_property/index.html
An unsealed copy of the Tax Arrears List must be posted in the Municipal office where it will be accessible to the public Mitigate unauthorized removal Update information as required
35 Preparing and Filing the List (con t) o Tax Arrears List The municipality must notify the persons who are liable to pay the tax arrears that a tax arrears list has been prepared and sent to the Registrar (s. 412(3)).
Preparing and Filing the List (con t) Send this notice at the same time that you send the Tax Arrears List to the Registrar by regular mail (presumed served within 7 days of mailing within Alberta and within 14 days outside of Alberta)
37 Preparing and Filing the List (con t) o Do not list property for which there is a lien registered from previous years. In order to re-start the tax arrears recovery process the old lien must be removed (s. 412(2)) o The Registrar will endorse the title certificates of each parcel of land with the tax recovery notification (s. 413)
Preparing and Filing the List (con t) o The Registrar must return the certified copy of the tax arrears list to the Municipality together with a statement of costs payable to the Land Titles Office by the Municipality (s. 413(2)) o municipality may add the costs to the taxes owing in respect of the parcels of land shown on the tax arrears list (s. 413(3)).
Preparing and Filing the List (con t) Complete Tax Recovery List land titles form Tax-1 Form A Must be completed by March 31 Complete Document Registration Request (DRR) on SpinII and print copy
Preparing and Filing the List (con t) o Not later than Aug 1 following the receipt of the Tax Arrears List, the Registrar must send a notice to (s. 417): o The owner of the parcel of land, o Any person who has an interest in the parcel that is evidenced by a caveat registered by the Registrar, and o Each encumbrance shown on the certificate of title
Preparing and Filing the List (con t) The notice must state: If the tax arrears are not paid before March 31 of the next year, the municipality will offer the parcel for sale at public auction (s. 417(2)(a)), and The Municipality may become the owner of the parcel if the parcel is not sold at the public auction
Preparing and Filing the List (con t) If you submit the list prior to March 31 and payment is made between that date and March 31: Notify Land Titles by letter Send by fax No charge incurred
Preparing and Filing the List (con t) Documents to retain/file: Copies of correspondence, email Title searches Agreements Related reports i.e. environmental, appraisals, RPRs, etc. Forms filed with Land Titles, Trustees, etc. Notes of conversations (in person, telephone) dated and signed
Preparing and Filing the List (con t) Documents to retain/file (con t): Council motions Advertisements Copies of expenses Returned mail Copies of proof of mailing lading slips from Canada Post and/or couriers
Preparing for Auction
Preparing for Auction o The municipality must offer for sale at a public auction any parcel of land shown on its tax arrears list if the tax arrears are not paid (s. 418(1))
Preparing for Auction (con t) The public auction must be held in the period beginning on the date referred to in s. 417(2))(a) and ending on March 31 of the year immediately following that date (s. 418(2))
Preparing for Auction (con t) Council sets the reserve bid (market value), date and time of the auction within the prescribed timeline as set out in the MGA (April 1 to March 31) Council also sets any terms and conditions for the sale (s. 419)
Preparing for Auction (con t) Request for Decision (RFD) Base RFD on the legislation requirements Date Place Time Reserve Bid Conditions Terms
Preparing for Auction (con t) Advertise public auction in Alberta Gazette not less than 40 days and not more than 90 days prior to date of auction. (s. 421) Place in one issue of a local newspaper, not less than 10 days and not more than 20 days from the date of the public auction. (s. 421) Ensure ads are the same
Preparing for Auction (con t) Send a copy of the Gazette advertisement not less than 4 weeks before the date of the auction to: o owner/owners of the parcel o each person/organization with a registered interest (caveat or encumbrance) (s. 421)
Preparing for Auction (con t) Obtain a new title search of all parcels to ensure that all parties with an interest in any parcel being offered for sale are notified. If a postponement of the auction is required or if the auction is cancelled due to taxes being paid, post the appropriate notice in a public place. (s. 422)
Preparing for Auction (con t) Prepare auction packages o Summary of property o Photograph(s) o Map o Pertinent information which should be disclosed Environmental reports Rentals Relevant legislation and internal processes related to post-sale procedures
Conducting the Auction
Conducting the Auction o Municipality does not have to offer a parcel for sale by public auction where: o The municipality has commenced an action under s. 411(2), or o The municipality has entered into a tax arrears agreement with the land owner (s. 418(4))
Conducting the Auction (con t) When can tax arrears be paid? o Any person may pay the tax arrears in respect of a property at any time until (s. 415(1)) The property is declared sold at public auction (s. 423(3)); or The property is disposed of pursuant to s. 425
Conducting the Auction (con t) What is the minimum amount that must be paid to avoid a tax sale? Unless the land owner enters into a tax arrears payment agreement (s. 418(4)), the full amount of the tax arrears and penalties must be paid in order to avoid a tax sale
Conducting the Auction (con t) o DO NOT discharge the Tax Recovery Notification from a parcel until the arrears and penalties are paid in full (i.e. the cheque clears) o If the Tax Recovery Notification is removed, it cannot be reinstated without re-starting the tax recovery process from the beginning
Conducting the Auction (con t) o Advertising requirements are mandatory. If the advertising requirements are not met, the Auction may be declared invalid and set aside by the Courts
Conducting the Auction (con t) If a postponement of the auction is required or if the auction is cancelled due to taxes being paid, post the appropriate notice in a public place. (s. 422) If a parcel is sold at public auction, and upon the purchaser meeting the conditions of the sale, transfer the title to the new owner by submitting the appropriate form to a Land Titles Office. (s. 423)
Conducting the Auction (con t) o Adjournment of the Auction is not required to be advertised o If notice/advertising requirements not met, the public auction should be adjourned to permit the requirements to be satisfied
Conducting the Auction (con t) Cancelling the Auction (s. 422(3)) o If the tax arrears are paid, the municipality must post a notice in a place accessible to the public during regular business hours stating that the auction is cancelled.
Conducting the Auction (con t) Prohibited Bidding and Buying (s. 429) o The auctioneer, councillors, CAO, designated officers and employees of the municipality must not bid for or buy, or act as an agent in buying, any land offered for sale, at the auction or a sale under s. 425
Conducting the Auction (con t) Prohibited Bidding and Buying (s. 429(2)) o The Municipality may direct a designated officer or employee of the Municipality to bid for or buy land that the Municipality wishes to become the owner of
Conducting the Auction (con t) Professional auctioneer, CAO or other designated officer may conduct the public auction Once the auctioneer declares the property as sold, the sale is final and there is no further ability for anyone to pay the tax arrears (s. 423(2))
Conducting the Auction (con t) Using a script: o Declare the auction open o Advise the audience of auction procedures o Advise that you will only be reading the description of each parcel being offered for sale once
Conducting the Auction (con t) o If there are no bids on a parcel, you will automatically proceed to the next parcel o Bidders will not be able to bid on a property that has closed (bids close when you have moved to next parcel)
Conducting the Auction (con t) o The order of properties being auctioned will follow the order of the properties listed in the advertisement o Bidders will be notified of the reserve bid for each property at the time it is put up for auction
Conducting the Auction (con t) o If reserve price (fair market value) is not met, parcel cannot be sold o If there are any questions, they can be asked now or questions about the specifics of a particular property may be asked at the time the parcel is offered
Conducting the Auction (con t) o Payment for properties will be received after bidding for all properties has concluded o For each parcel, repeat the terms and conditions of sale from advertisement
Conducting the Auction (con t) o Advise that all parcels being sold as is, where is o Municipality has no responsibility for any environmental contamination (s. 434.1)
Conducting the Auction (con t) o Maintain minutes of the auction and provide a report to Council (summary of properties offered, properties receiving bids and information with respect to successful bidders for each parcel sold) o Can adjourn auction to obtain an answer to a question (up to 2 months from date of auction)
Conducting the Auction (con t) Municipal representative should be present to ensure proper process and procedures are followed
After the Auction
After the Auction o The money paid for a parcel of land at an auction or pursuant to s. 425 must be (s. 427(1)): odeposited by the Municipality in an account established solely for the purpose of money from the sale or disposition of land under this Division
After the Auction (con t) o The money paid for a parcel of land at an auction or pursuant to s. 425 must be paid out in accordance with s. 427 and 428
After the Auction (con t) The following must be paid first and in the following order: (a) any remedial costs relating to the parcel; (a.1) the tax arrears in respect of the parcel; (b) the lawful expenses of the municipality;
After the Auction (con t) (c) expenses owing to the Crown that have been charged against the parcel pursuant to s. 553 (d) administrative fee of 5% of the sale amount, payable to the Municipality
After the Auction (con t) o If there is any money remaining after payment of the above the municipality must notify the previous owner that there is money remaining. o Tracking internal processes, GL accounts, cost accounting/excel spreadsheets
80 After the Auction (con t) What are Remedial Costs? All expenses incurred by the Government of Alberta to perform work under an environmental protection order or an enforcement order under the Environmental Protection and Enhancement Act (s. 410(c.1)) Remedial Costs have First Priority under s. 427
After the Auction (con t) What are Lawful Expenses? o o o o o o o Advertising costs Auctioneer costs Appraisal fees Legal fees Postage Land Titles searches and registration fees s. 413(2) costs
After the Auction (con t) Section 553(1) Council may add the following amounts to the tax roll of a parcel of land: (f) costs associated with tax recovery proceedings related to the parcel;
After the Auction (con t) o previous owner includes the Crown if the Municipality has been notified that the land has vested in the Crown, and any money remaining must be paid to the Minister responsible for the Unclaimed Personal Property and Vested Property Act.
After the Auction (con t) s.427 Surplus Proceeds o If the municipality is satisfied there are no debts secured by an encumbrance on the certificate of title for the parcel, the Municipality may pay the money remaining to the previous owner.
After the Auction (con t) S.427 Surplus Proceeds o If the municipality is not satisfied there are no debts secured by an encumbrance on the certificate of title for the parcel, the Municipality must notify the previous owner to make an application to Court to recover all or part of the money.
After the Auction (con t) o A person may apply to Court of Queen s Bench for an order declaring that they are entitled to any part of the surplus proceeds from a parcel (s. 428) o Application must be made within 10 years after the date of the public auction or of a sale under s. 425, as applicable
After the Auction (con t) o The Court must decide if notice must be given to any other person and in that event the hearing must be adjourned to allow notice to be given. o In making an order, the Court must have regard to the priorities in which sale proceeds are distributed in a foreclosure action.
After the Auction (con t) Municipality may become the owner of the parcel if the parcel was not sold at the public auction (s. 424) Municipality takes land subject to encumbrances listed in s. 424(3)
After the Auction (con t) o Obligation to protect interests of previous owner until title transferred under s. 425(1) o The Municipality may sell, rent or lease property (as close to market value as possible) o If tax arrears and other costs and expenses are paid through rent, title is returned to the former owner but the owner must honour the lease
After the Auction (con t) Section 426 - Revival of Title The previous owner can pay the tax arrears any time after the Municipality becomes the owner of the parcel under s. 424 but prior to the Municipality disposing of the parcel under s. 425(1)
After the Auction (con t) If parcel is not sold at public auction, municipality may, if it wishes, take title by forwarding request to a Land Titles Office to cancel existing Certificate of Title and issue new one in the name of the municipality. (s. 424)
After the Auction (con t) If municipality acquires title pursuant to section 424 it may sell property by: Selling parcel at price as close as reasonable to market value. Municipality acquires fee simple title by paying amount required under s. 425(1)(b).
After the Auction (con t) Municipality may grant lease, licence or permit. Money paid for property sold at or after the public auction, or paid through a lease, licence, or permit are to be deposited into a separate account designated solely for Division 8 tax recovery proceeds. (s. 427)
After the Auction (con t) Subject to subsection (3.3), if there are surplus proceeds following a sale, the municipality may pay the surplus to the previous owner (s. 427 (3.3)) If surplus funds are not paid out, the previous owner must be notified that he or she can make application to the Court of Queen's Bench to obtain the surplus funds (s. 427 (3.2))
After the Auction (con t) If no application is made by previous landowner to the Courts for the surplus proceeds the municipality can, after a 10 year period, make use of the funds for any purpose. (s. 428.1)
After the Auction (con t) If parcel has been offered for sale but not sold at public auction and has had a tax forfeiture registered against it, the municipality may request a title in the name of the municipality on the expiry of 15 years following the date of the public auction. This does not apply when the municipality is notified that the land has vested in the Crown (s. 428.2)
Thank You! Lavinia Henderson, CLGM lhenderson@civicsolutionsinc.com