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Demystifying Public Auctions and Tax Sales
If property taxes are not paid, municipalities need to know what steps they can take. Part 10, Division 8 of the Municipal Government Act (MGA) explains how municipalities can recover unpaid property taxes on land. The MGA gives municipalities several helpful options, but the process can be difficult to follow. This article answers common questions about tax recovery and public auctions.
What are tax arrears?
Part 10, Division 8 helps municipalities recover “tax arrears.” This does not mean all unpaid taxes. Under section 326(1)(c) of the MGA, “tax arrears” are taxes that remain unpaid after December 31 of the year they were imposed. For example, if taxes are due on June 30, 2026, they only become “tax arrears” if they are still unpaid on January 1, 2027. Before then, late payment penalties may apply if a bylaw allows them, but the taxes are not yet “tax arrears” under the MGA.
What can a municipality do if there are outstanding tax arrears on a property?
Municipalities generally have two ways to recover tax arrears.
The first option is the public auction and tax forfeiture process. In simple terms, the municipality can offer the property for sale at a public auction. If the property does not sell, the municipality can take tax forfeiture title and then try to sell the property another way, such as by listing it with a realtor. If the property sells at auction or after tax forfeiture title is taken, the MGA explains how the sale money must be used.
The second option is to sue for the unpaid tax arrears. Section 411 of the MGA allows a municipality to bring a court claim to recover tax arrears. This option is available until the property is sold at a public auction or sold after the municipality takes tax forfeiture title. This means a municipality can pursue both options at the same time. Suing may be especially useful if the municipality knows the owner has other assets.
What does the lead up to a tax auction involve?
The first step is to register a tax recovery notification on title. Each year, by March 31, municipalities must prepare and send Land Titles a list of all properties with tax arrears. Land Titles then records a tax recovery notification on those titles. Land Titles also sends a notice to the registered owners. The notice tells them that if the arrears are still unpaid by March 31 of the next year, the property will be offered for sale at auction.
Using the 2026 example above, taxes from 2026 become tax arrears on January 1, 2027 if they are unpaid. The tax recovery notification would be registered on title in 2027. The owner would then have until March 31, 2028 to pay the tax arrears and avoid a public auction.
If the tax arrears are still unpaid by March 31, 2028, the municipality must move toward an auction. The municipality must advertise the auction in the Alberta Gazette and in a newspaper that generally circulates in the municipality. The MGA has detailed rules about what the advertisements must say and who must receive notice. If your municipality needs to hold a tax auction, review section 421 of the MGA carefully.
There are exceptions. A municipality does not have to hold an auction if it has started a civil claim to recover the taxes under section 411, or if it has made an agreement with the owner to repay the arrears over up to three years.
How can a person halt the tax recovery process?
Section 415 of the MGA allows “any person” to pay the tax arrears. This means someone other than the owner can pay them. If the arrears are paid before the public auction, the municipality must ask Land Titles to remove the tax recovery notification. In practical terms, an owner could pay the arrears shortly before the auction and stop the auction from going ahead. The arrears can be paid up until the municipality finally sells the property, even if the municipality has already taken tax forfeiture title. If the arrears are paid after the municipality takes title, the municipality must notify Land Titles, and Land Titles will revive the previous certificate of title.
What terms and conditions will apply to a sale at a public auction?
Council must set a reserve price that is as close as reasonably possible to the property’s market value. Council must also set the sale conditions. These may include payment terms, a statement that the property is sold “as is, where is,” and the possession date.
The land did not sell at the public auction. What’s next?
If the property does not sell at the auction, the municipality may ask Land Titles to issue a new “tax forfeiture” title in the municipality’s name. The municipality does not have to do this. Tax forfeiture title is not the same as full ownership, but it lets the municipality try to sell the property under section 425 of the MGA, such as to a third-party buyer. It also allows the municipality to grant a lease, licence, or permit for the property.
The municipality may also decide to acquire the property for its own use. If it does, it must deposit the amount it would have received from a third-party sale into the account used for tax sale proceeds.
Can the occupant just keep living in the property after a public auction?
The municipality decides whether occupants can stay in the property after a tax auction. Once the property has been offered for sale at public auction, the municipality is entitled to vacant possession. The municipality can enter the land to take possession. If someone resists, the municipality can apply to the Court of King’s Bench for an order for possession. In practice, the municipality may first serve a notice requiring the occupant to leave by a specific date. If the occupant does not leave by that date, the municipality may then apply for a court order.
Can the municipality sell tax forfeiture property for whatever price it wishes?
No. If the municipality sells the property to a third party, or decides to acquire it for itself, it must sell or value the property at a price that is “as close as reasonably possible” to market value. Municipalities should have a reasonable basis for the market value, such as an appraisal or a comparative market evaluation from a realtor.
What happens to the money from a tax auction or tax forfeiture sale?
Sections 427 and 428 of the MGA explain how municipalities must handle money from a public auction or a sale under section 425. In short, the municipality must keep the money in a separate account used only for tax recovery proceedings. Section 427 also sets out what must be paid from the sale proceeds, and in what order. This includes remedial costs related to the property, the tax arrears, lawful municipal expenses, and a 5% administration fee based on the amount paid for the parcel.
If money is left after those required payments, the municipality must notify the previous owner. If the municipality is satisfied there are no other encumbrances against the property, it can pay the surplus directly to the previous owner. If the municipality believes other creditors may have claims to the money, it may wait for the owner to apply to Court for an order directing that the money be paid out.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
