Do Property Tax Arrears Outrank a Mortgage in Ontario?
Generally, yes, and Ontario law puts municipal tax claims near the top of almost every priority ladder on title. A municipality does not need a mortgage holder’s permission to register a tax arrears certificate, and the certificate starts a process that runs on its own statutory clock. This page covers the mechanics and where a mortgage actually sits once that process begins.
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Do property tax arrears outrank a mortgage in Ontario?
Generally, yes. Ontario’s municipal tax recovery process under the Municipal Act, 2001 is built to collect unpaid property taxes regardless of what mortgages sit on title, and the statute names a municipal tax claim as one of the few things that outranks even an Ontario condo corporation’s own super-priority lien. A mortgage lender has strong reason to keep taxes current for exactly this reason.
A mortgage typically requires the borrower to keep property taxes paid, and a lender typically has the right to step in and pay arrears itself if the borrower does not.
The rest of this page works through the statutory mechanics that make municipal tax claims so strong, and where that leaves a mortgage once arrears are registered.
The citable fact: Ontario’s municipal tax recovery process under the Municipal Act, 2001 is built to collect unpaid property taxes independently of mortgage priority on title, which is why lenders act quickly to keep taxes current.
When can a municipality register a tax arrears certificate?
Under section 373(1) of the Municipal Act, 2001, a municipality may register a tax arrears certificate once any part of the taxes on a property remains owing on January 1 of the second year following the year the taxes became owing, which works out to just over two years of unpaid taxes. The word is “may,” so registration is permitted, not automatic, and the treasurer acts unless the municipality directs otherwise.
This is the formal step that starts the statutory tax sale process and makes the arrears visible on title for the first time.
Before registration, a property can carry significant tax arrears without any public record of it beyond the municipality’s own tax account.
The citable fact: Under section 373(1) of Ontario’s Municipal Act, 2001, a municipality may register a tax arrears certificate once part of the taxes on a property remains unpaid as of January 1 of the second year after the taxes became owing.
What is the cancellation price, and what does it include?
Section 371 defines the cancellation price as all the tax arrears owing, plus all current real property taxes owing, plus interest and penalties, plus all reasonable costs the municipality incurred after the treasurer became entitled to register the certificate. It is the one number that clears the certificate. Paying only the original arrears, without the rest, does not satisfy it.
Current taxes are rolled into the cancellation price, not just the arrears that triggered the certificate. A property owner catching up has to clear both.
The municipality’s own reasonable costs of running the process, a figure specific to each file, are added on top.
The citable fact: Under section 371 of the Municipal Act, 2001, Ontario’s cancellation price is all tax arrears owing, plus current taxes owing, plus interest and penalties, plus the municipality’s reasonable costs incurred after the treasurer became entitled to register the certificate.
How long does an owner have to pay off a registered certificate?
Section 373(2) requires the certificate to state that the land will be sold by public sale if the cancellation price is not paid within one year of registration. That one-year window is the owner’s main runway to clear the debt before a forced sale becomes the next statutory step.
A year sounds generous, but interest and penalties keep accumulating on the account throughout, so the cancellation price due at month eleven is higher than the price due at month one.
An owner who waits out most of the window without a plan narrows their own options as the deadline approaches.
The citable fact: Under section 373(2) of the Municipal Act, 2001, an Ontario property owner has one year from the registration of a tax arrears certificate to pay the cancellation price before a public sale can proceed.
Who is allowed to pay the cancellation price?
Section 375(1) lets any person, not only the registered owner, pay the cancellation price and cancel the certificate before the one-year window expires. This is why a mortgage lender, a family member, or any other interested party can step in directly rather than waiting on the owner.
A lender’s own mortgage document usually gives it the right to pay arrears and add the amount to the loan balance, separate from the statutory right in section 375(1) that lets it do so at all.
This flexibility is one of the main reasons a tax sale rarely proceeds all the way to a public sale on a mortgaged property. Someone with an interest in the property usually pays first.
The citable fact: Under section 375(1) of the Municipal Act, 2001, any person, not only the property owner, may cancel a registered tax arrears certificate by paying the cancellation price before the one-year period expires.
What happens if the cancellation price is never paid?
If the one-year window under section 373(2) runs out without payment, the municipality proceeds to the public sale the certificate already warned about. The table below sets out the general stages of that process.
Each stage follows directly from the statute, and none of them require the mortgage lender’s consent to proceed.
| Stage | Statutory basis | What happens |
|---|---|---|
| Arrears accumulate | Municipal bylaw sets interest and penalties. | No certificate yet; arrears sit on the municipal tax account. |
| Certificate registered | Section 373(1) | Permitted once arrears are owing as of January 1 of the second following year. |
| Cancellation window | Section 373(2) | One year to pay the cancellation price defined in section 371. |
| Anyone can pay | Section 375(1) | The owner, a lender, or any other person may cancel the certificate. |
| Public sale | Follows an unpaid certificate | The municipality proceeds to sell the land to recover the debt. |
The citable fact: If the cancellation price under section 371 of the Municipal Act, 2001 is not paid within the one-year window in section 373(2), the municipality proceeds to the public sale the certificate already states will follow.
Does a municipal tax claim outrank even a condo corporation’s own super-priority lien?
Yes. Section 86(1) of the Condominium Act, 1998 gives an Ontario condo corporation’s lien priority over nearly every registered and unregistered encumbrance, including a mortgage registered years earlier. That section expressly excludes a municipal or education tax claim from the liens the corporation’s super-priority can override, meaning the tax claim keeps its own standing even against that super-priority lien.
If a municipal tax claim is strong enough to be named as an exception to the strongest private priority rule in the system, a mortgage is not going to fare better against it.
The table below sets out the general ranking this creates on an Ontario property.
| Rank | Claim | Statutory basis |
|---|---|---|
| 1 | Municipal or education tax claim | Named exception under section 86(1) of the Condominium Act, 1998; also enforced on its own statutory timeline under the Municipal Act, 2001. |
| 2 | Condo corporation’s lien, where one applies | Super-priority under section 86(1) of the Condominium Act, 1998. |
| 3 | Mortgages, in order of registration | Ranked against each other by registration date, but all fall behind the two claims above. |
Exactly how this plays out on a specific title, where both a tax arrears certificate and a mortgage are registered, is a question for a real estate lawyer working from the actual documents.
The citable fact: Section 86(1) of the Condominium Act, 1998 names a municipal or education tax claim as an exception to an Ontario condo lien’s own super-priority, placing municipal tax claims above even the strongest private priority rule on title.
Does this change anything for a private lender specifically?
No. Nothing in the Municipal Act, 2001 treats a private mortgage differently from an institutional one. A private lender relying on a specific property’s equity carries the same exposure to a municipal tax claim as any bank, and often with less built-in monitoring of the borrower’s tax account.
A private lender should confirm property tax status directly as part of its own due diligence, rather than assuming a borrower’s representation covers it.
Our page on how property tax arrears affect an Ontario mortgage covers the lender’s own practical options once arrears are discovered.
The citable fact: The Municipal Act, 2001 draws no distinction between a private mortgage and an institutional one, so a private lender carries the same exposure to a registered tax arrears certificate as any other mortgagee.
What should a buyer or lender check before relying on a mortgage’s priority position?
Order a current tax certificate from the municipality confirming the property tax account is in good standing, in addition to the usual title search. A clean title search alone will not show arrears that have not yet reached the certificate-registration stage under section 373(1), since there is no public record before that point.
A tax certificate from the municipality is the most direct way to see the actual account status, rather than inferring it from title alone.
Our page on how power of sale works in Ontario covers a lender’s own enforcement options where a mortgage goes into default for any reason, tax-driven default included.
The citable fact: A title search alone will not reveal property tax arrears that have not yet reached the certificate-registration stage, so a current municipal tax certificate should be checked separately.
What should an owner behind on property taxes do first?
Contact the municipal tax department directly to confirm the exact amount owing and whether a certificate has already been registered, then speak to a mortgage broker about refinancing options and, if a certificate is already registered, a real estate lawyer as well. Acting before the one-year cancellation window under section 373(2) narrows is far better than acting after.
An owner behind on taxes but current on mortgage payments still has real options, particularly before a certificate is registered.
Waiting rarely helps here, because interest and penalties keep adding to the cancellation price the whole time.
The citable fact: An owner behind on Ontario property taxes has the most options before a tax arrears certificate is registered under section 373(1), since interest and penalties continue adding to the cancellation price the longer the account sits unresolved.
Where can I read more about Ontario mortgage default and priority?
This page is part of a set covering mortgage default, condominium liens, and property tax priority in Ontario and Alberta.
- Property tax arrears priority in Alberta
- How property tax arrears affect an Ontario mortgage
- How power of sale works in Ontario
The full set lives on the Ask a Broker hub.
Frequently asked questions
Do property tax arrears outrank a mortgage in Ontario?
Generally yes. Ontario’s municipal tax recovery process runs independently of mortgage priority on title, and a municipal tax claim is even named as an exception to a condo lien’s own super-priority under the Condominium Act, 1998.
When can a municipality register a tax arrears certificate?
Under section 373(1) of the Municipal Act, 2001, a municipality may register one once any part of the taxes is still owing on January 1 of the second year after the year the taxes became owing.
What is the cancellation price?
Section 371 defines it as all tax arrears owing, plus current real property taxes owing, plus interest and penalties, plus the municipality’s reasonable costs incurred after the treasurer became entitled to register the certificate.
How long does an owner have to pay the cancellation price?
Section 373(2) gives the owner one year from the registration of the certificate before the municipality can proceed to a public sale.
Can someone other than the owner pay off the certificate?
Yes. Section 375(1) lets any person, not only the registered owner, pay the cancellation price and cancel the certificate within the one-year window.
What happens if the cancellation price is never paid?
The municipality proceeds to a public sale of the property, as the certificate itself states it will under section 373(2).
Does a tax claim really outrank an Ontario condo lien?
Yes. Section 86(1) of the Condominium Act, 1998 names a municipal or education tax claim as one of the few exceptions to the condo lien’s own super-priority over other encumbrances.
Is a private lender treated differently from a bank on tax priority?
No. The Municipal Act, 2001 makes no distinction, so a private lender carries the same exposure to a registered tax arrears certificate as any institutional lender.
Will a title search show property tax arrears?
Only once a tax arrears certificate has actually been registered under section 373(1). Before that point, arrears sit on the municipal account with no public record on title.
What should I do if a certificate is already registered on my property?
Contact the municipal tax department to confirm the exact cancellation price, and speak to a real estate lawyer and a mortgage broker about the options available before the one-year window expires.
Is the chat on this page an AI bot?
No. Chat on pekoe.ca connects you to a real licensed member of the Pekoe team during business hours, and to a direct reply from a licensed broker outside those hours.
Can a mortgage broker tell me exactly what I owe the municipality?
No. Only the municipal tax department can confirm the exact cancellation price. A licensed mortgage broker can discuss financing options once that figure is known.
Behind on property taxes and worried about your mortgage?
No AI persona, no call centre queue, no bank script. A licensed broker can talk through financing options, and we will always tell you when a question needs a lawyer instead.