An Alberta Land Titles backlog means new homeowners could find themselves unwittingly facing late property tax charges if they are not careful.
Delays in processing changes in land titles mean those who bought a new property in the last three months or so may not yet be the registered owner as far as municipal tax collectors are aware.
Most Alberta municipalities sent out their tax notices in the last couple of weeks. In Red Deer, tax notices went out on May 24 and the tax payment deadline is June 30.
However, as of Tuesday, Alberta Land Titles had only processed land title changes up to Feb. 24. Municipalities use that information when determining who to send tax notices to. So, someone who bought a home since then may not get a tax notice.
Sarah Strauss, owner of Innisfail’s The Place to Mortgage, advises new homebuyers to be aware of the delay and talk to their real estate lawyer to get advice on how best to protect themselves from inadvertently paying their property taxes late.
“What we’re trying to do is just encourage our clients to have some proactive conversations with their lawyer they used on closing as well as the municipality ahead of time,” said Strauss.
Real estate lawyers often recommend title insurance, which allows money to change hands and the deal to close before the title has been officially transferred, as well as offering other protections such as against certain types of fraud.
Strauss said it is easy for some new homebuyers to miss details such as the property tax bill on something they have only owned for a few weeks.
“In our experience, when a lot of people become homeowners they’re excited, they are thinking about picking out their new couch, property taxes isn’t in the front in their minds.”
Complicating the issue is that not all municipalities are taking the same approach to dealing with the land titles lag.
“We’ve talked to several municipalities and counties in Alberta to try to come up with a solution for our clients and to make them aware of it. But what we’ve realized it’s definitely been a standard set by each municipality on how they have been handling it.”
Some municipalities are making it relatively easy to make arrangements to avoid late payment penalties while the land titles paperwork gets sorted out. As long as someone can provide proof they are the new owner through legal documents included in typical closings that will be accepted.
But others are taking the position that property taxes must be paid by the registered owner of the property on municipal records, even if that information is out of date because of the backlog.
“Other municipalities have said regardless of what proof you have if you are not the actual registered landowner according to Land Titles Alberta we will not take payment from you,” she said.
“We’ve found in our phone calls that there are some municipalities that are really trying to make it work and there are some municipalities have said to us there is nothing we can do and the clients will have penalties come July.
“Unfortunately, there are some people who are going to be paying penalties, and there is nothing they can do about it.”
City of Red Deer controller of property taxes Roxane Preedin said the city relies on Alberta Land Titles for information on property owners and the list is regularly updated twice monthly and the city sends out a notice to the new homeowner acknowledging the change.
However, unless informed through some other means the city has no way of knowing a property has changed hands until it hears from Land Titles.
“So, essentially what this means if we have not received a change of ownership … it is more than likely (the new owner) will not receive a tax bill notice.”
Preedin advises homebuyers to talk to their real estate lawyer about how best to handle property tax issues.
“But certainly if they haven’t received a copy of the tax notice and they know they are responsible they can reach out to us and we can work with them,” said Preedin, adding taxes can be paid on the property even if the city has not yet received the Land Titles update.
There actually could be two issues affecting new homebuyers. Besides not getting a tax bill on their new property, they might get one for a property they no longer own.
“They might wonder, why are you sending this to me?”
Preedin said by the first week of June most people should have received their tax bill. If they don’t have one by then, call or email the city’s tax department at firstname.lastname@example.org or call 403-342-8126.
The backlog was apparently caused by a processing slowdown that happened as COVID-19 health restrictions meant office staff numbers were reduced through illness or required quarantines and more people worked remotely.
The Alberta government is well aware of the issue and set aside $9 million in its 2022-23 budget specifically aimed at reducing the backlog.