Tax sale goes mathematical

[Jayz]

Minimum tender $10. Crown interest $20 (known to those who do their homework).

Tender A: $10
Tender B: $30

If Tender A is the only tender, he or she wins and has to pay $10 plus crown interest $20. So he or she ends up paying $30 in total for the property.

In all other cases, Tender B wins at $30, with $10 going to local Treasure and surplus $20 to Crown. (Or NOT?)

Both A and B would have to pay the same amount of money to acquire the property. The only difference is B is guaranteed to win, knowing the $20 Crown or not. Can we say B has "applied" a better strategy to win the property?

[Matt]

Very interesting question, Jayz.
My answer to your question in the last paragraph would be "NO".
A or B, assuming one of them is the winner, would be liable for the crown lien.

My understanding is as follows:

Of the $30, $10 will paid out to the municipality, and the remaining $20 will be sent out to the Ontario superior Court.
That money will be held for one year during which the previous owner or any other entities interested in the property can claim for their share.
After a year, the court will be sending $20 (if no one came forward) or a part of the $20 back to the municipality, ie. the municipality get free gift money in this case. 

I don't believe that the $20 surplus is supposed to be utilised to pay off registered crown debts.

Curious what Frank or other senior members would further explain about this situation. 

[Dave2]

Both A and B would have to pay the same amount of money to acquire the property. The only difference is B is guaranteed to win, knowing the $20 Crown or not. Can we say B has "applied" a better strategy to win the property?

Jayz:

I think the best answer is it depends.  I am not a lawyer so will approach it from practical perspective and let the legal beagles on the board comment from the legal perspective.  

I am going to use the analogy of a mortgage with someone who has guaranteed the mortgage that goes into default.  Revenue Canada like our mortage holder wants all of what is owed to them and wants to get it in the simplest way possible.  So that being said
if the easiest way to get their money is from the court they will try that.

 The key issue is I am not certain what the priority of their claim is or if they have a claim  compared to other possible claimants (especially the municipality) though I have heard of cases where the municipal treasurer negotiated in advance with Revenue Canada for a split. I am pretty sure though they would rank ahead of the property owner and I think slighty differently then Matt's good response in that I would use the word "could" compared to his "would".  The difference is that a key element of this business is risk management

As their claim is in the form of a lien I don't believe that the court can prevent them from claiming the money but like a building lien
on a property that has a mortgage their ranking compared  to other forms of debt claimants is subject to complicated rules.

From a bidding perspective I think a lot will depend on the specifics and size of the bid relative to the property tax claim by the municipality and what is for sale. Interesting enough there is possibly an interesting strategy if you are number two bidder in cases like this and I am willing to share it with you personally because of  your good question.  

As I may need it someday I will NOT be putting it in the public domain.  

[Frank]

Firstly, the courts do not automatically send the money back to the municipality, the Town Treasurer has to approach the court and request it,,,,which they do, and they do get the money....nice windfall.   Most smart Treasurers will place the money into reserves for capital works, rather than using it to defray current taxes and effect a short term freeze or reduction of tax rates which would only come back to bite them in the you know what.

Secondly, yes the Crown could as for it...but the reality is the Crown doesn't give a sh_t.  The Crown has a $20 claim to the property either way and won't go out of it's way to secure it from excess proceeds.