“Four hundred and twenty-five thousand dollars once, 425,000 dollars twice, 425,000 dollars three times… sold! » Among the approximately 200 people gathered in a large glass room at the Bonsecours market in Montreal, Khaled Lachhab lowers his cardboard bearing the number 151 and walks towards the City employees, seated at the front. The man in white sneakers, dazzling smile, has just taken possession of a duplex on rue Saint-André, in the borough of Villeray–Saint-Michel–Parc-Extension, for around $300,000 less than the municipal assessment.
It is possible to get your hands on a house or land for a fraction of its value by participating in auctions for unpaid municipal taxes organized by many cities and municipalities in Quebec. If you have cash (and strong nerves), this can be an interesting way to invest or access property, which however carries risks.
Last resort sale
Every year, cities, municipalities and regional county municipalities (RCMs) in Quebec auction properties for which municipal taxes or real estate transfer taxes (the “welcome tax”) have not been fully paid. . In several large cities (Montreal, Quebec, Trois-Rivières), these auctions take place in November, but it is not the same everywhere. The one in Longueuil is held in September, so it is better to check on the website of your city or municipality.
A public notice published in the months preceding the sale (usually in local newspapers and online) contains the list of properties up for auction, which usually melts like snow in the sun until the big day. Either because the owners pay their dues to avoid finding themselves homeless, or because the banks having granted a mortgage loan reimburse the amount requested so as not to lose their rights. In Montreal, for example, the September 2023 public notice mentioned 1,373 properties, but only 9 of them were sold at auction two months later.
To participate in such a sale, you must appear in person at the location indicated and register at reception using an identity document. You can bid for yourself, for someone else, or for a business. You will be given a numbered card as well as the list of buildings up for auction.
For the rest, it looks a lot like what we see in the movies. The clerk – or his deputy – gives information concerning each building put up for sale (address, amount claimed, municipal assessment, etc.) and interested people raise their cards to make an offer. During the most recent Montreal auctions, city employees walked around the room, listened and announced each price offered on the microphone. The person who wins the auction must immediately pay the price offered, by certified check, bank draft or cash. In other words, it is impossible to take out a mortgage.
Caution is advised
Before you raise your cardboard high, know that you buy a property at your own risk, since no complete inspection of the premises is possible before the auction. During Montreal auctions, for example, any building is acquired “without guarantee of capacity or against hidden defects”, underlines the City’s documentation.
If you win an auction, it is also not certain that you will be able to keep the property for the long term. The former owner has one year to exercise what is called a right of withdrawal, that is to say, buy back his property. In this case, he will have to pay you the amount you paid during the auction, plus 10%. “On the day of the auction, we obtain possession of the building, but we do not have ownership of it,” summarizes Sylvianne Fréchette, notary and legal popularizer at Éducaloi.
For some, like Khaled Lachhab, who is used to City of Montreal auctions, it’s an insurance policy. “At best, I get a building at a good price. At worst, I get my money back with 10% more,” he says. But for others, this redemption can mean the end of a dream.
“After one year, if there has been no right of withdrawal, the person who won the auction can sign a formal deed of sale before a notary,” explains Sylvianne Fréchette, which can cost to the buyer from $750 to $2,000, depending on the mandate.
This period of uncertainty between the day of the auction and the moment when you officially become the owner can also cause certain problems, adds the notary. It is not possible to resell the building a few months after winning the auction – since you are not yet the owner – and it is risky to undertake renovations without knowing if the former owner will return. .
If a mortgage — regardless of its nature — is associated with the house or land you have just taken possession of, you have nothing to fear. The sale for unpaid municipal taxes “purges the building of any mortgage with which it may be encumbered,” says City of Montreal spokesperson Gonzalo Nuñez.
Ultimately, if you have money at your disposal and you are willing to take on some risk, there is nothing to lose by taking a chance. The vast majority of people who came to the Bonsecours market on a cold fall day left empty-handed, but not Khaled Lachhab, who was participating in the auction for the fifth year. “For me, it’s a question of investment,” he explains.
Before the duplex acquired for $425,000, he got his hands on a building with 14 apartments and three commercial premises which had been greatly neglected by its previous owners. Major work will be required to restore it, but the building only cost $420,000, less than a fifth of the municipal assessment. A boon.
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2023-11-17 17:38:20
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