Taxes Outstanding: What happens if they are discovered following closing?
There was a time when tax arrears certificates were ordered by lawyers routinely. It was part of their job. It wasn’t costly, about $25.00. Then, the transaction on closing would direct part of the funds to pay off the arrears.
Today, that’s no longer the case. The Buyer’s solicitor rarely searches for unpaid taxes. That saves $25.00, and the Buyer can put those savings towards the purchase of a Title Insurance policy. In fact, that’s how the title insurers market their product: “basically, it’s free, just look at all the money that you are saving”.
Now, the statement of adjustments is calculated with the Seller’s estimates. No funds are directed for tax arrears, unless the Seller volunteered this information. The Buyer, of course, will find out later. There will be a surprise in the mail.
On closing the Seller would have undertaken to pay up any tax arrears and readjust taxes if necessary. The Buyer’s solicitor will now write a letter seeking compliance with this Undertaking. The expectation is that the Seller will comply. If, however, the Seller is now bankrupt, refuses to make payment or has simply left the country, then the Buyer will be able to make this claim on the title insurance policy. This is likely to take 6 to 10 months.
Brian Madigan LL.B., Broker
We haven’t modified the form to allow for your suggestion regarding Re-adjustment – silly, title insurance has been standard operating procedure for at least 10 yrs. Who’s ON that committee at OREA?