When you purchase a home, your real estate lawyer will likely emphasize the importance of paying your property taxes regularly and on-time. While paying your property taxes on-time seems like common sense advice, the consequences of non-payment are greater than missing a phone bill or electric bill payment.
Mortgage lenders generally consider non-payment of property taxes an act of default under the terms of your mortgage. In other words, if you don’t pay your property taxes on time, the fine print in your mortgage allows your bank to foreclose on your house.
Don’t default on your property taxes!
In the recent Alberta Court of Appeal decision of Santoro v. Bank of Montreal [2018 ABCA 264], the Bank of Montreal commenced foreclosure proceedings against a borrower after repaying tax arrears owing to the municipality. The tax arrears were considered an act of default, and BMO was allowed to pursue foreclosure proceedings against the borrower. BMO went on to demand full payment of all indebtedness under the mortgage within 7 days of the borrower’s default, which amounted to $550,000.00.
The above case is just one example of many where banks foreclose on homeowners for non-payment of property taxes. When a lender gives you a mortgage, they want to ensure that their interest in your property is secure and that title is free of other registrations. Municipalities often register an interest against title when there are significant property tax arrears.
Speak with your lender
The important takeaway from this case is that you should do whatever it takes to make sure that your property taxes are paid regularly and on-time. If you foresee any challenges with making timely mortgage or property tax payments, you should speak with your lender and discuss your options to avoid being noted in default.
When you purchase a home, the experienced real estate lawyers at West Legal will take the time to explain the fine print of your mortgage in simple terms so you can avoid common pitfalls and remain in good standing with your lender.
Cases Commented On: Santoro v. Bank of Montreal [2018 ABCA 264]