Skip to content
26.0 °Cforecast >
Partly Cloudy
Jobs | Contact | Tip line: 705-673-0123

Landowner owes millions in property taxes

The owner of three properties on Fielding Road in Sudbury owe the city millions in tax arrears, dating back to 1995. But businesses still operate on the land, despite repeated attempts by the city to auction the properties to recover the debts.
The city has had no luck securing a buyer for two properties on Fielding Road, despite knocking some $600,000 off the $3 million in unpaid property taxes on the property. Supplied

The owner of three properties on Fielding Road in Sudbury owe the city millions in tax arrears, dating back to 1995. But businesses still operate on the land, despite repeated attempts by the city to auction the properties to recover the debts.

The properties are located at 259 Fielding Rd. and 235 Fielding Rd. The land is owned by a numbered company, 655131 Ontario Ltd. According to a business title search, the last directors of the company were Michael McGuire and Theresa McGuire. Michael McGuire didn’t respond to calls and emails from Northern Life seeking comment for this story.

A person who answered the phone Jan. 25 at Algonquin Equipment, which is located at 259 Fielding Rd., said McGuire was on vacation. Someone else responding to another call Jan. 28 said he was retired.

The city’s most recent attempt to sell the land through public auction took place in October 2012, when the properties were available for just more than $2 million.

However, just like previous auctions, the properties failed to attract a single bidder. Located in the heart of an industrial park, sources have told Northern Life that the city and private developers don’t want to take ownership of the property because of fears it may be a “brownfield,” the term for land that has been used for industrial purposes in the past, and therefore may have significant environmental problems.

Tony Derro, Greater Sudbury’s manager of taxation, said the file goes back to before amalgamation, although he couldn’t say how far. However, sources tell Northern Life the file dates back 18 years and the total unpaid property taxes exceed $3 million.

And a land title search uncovered that the first notice for tax arrears on the property was registered in 1995, when the land was still part of the former Town of Walden.

The city has written down the amount of taxes owing on multiple occasions in hopes of selling the property so it can receive revenue from it again.

Most recently, in 2011 city council agreed to write off $610,000 in back taxes in hopes it would make the property more attractive to a buyer. Under provincial rules, the land can’t be sold for less than what the city is owed in back taxes and other fees.

While not talking about the Fielding Road properties in particular, Derro said getting revenue out of brownfield properties can be a huge challenge for the city.

Whereas the city can “vest,” or take ownership, of a property once tax arrears reaches a certain point, when those lands are on suspected brownfields, things get complicated.

Taking ownership of industrial lands could be hugely expensive for the city if they were to take them over and be forced by the province or a future owner to deal with any environmental concerns.

“We’re cautious about getting on a property that we may be ordered by the Ministry of Environment to clean up,” Derro said. “We’re very, very careful about that. Because once one is on the title, one could be a potential cleaner.”

It’s that fear keeps the city and other potential buyers away from properties with suspected environmental issues, and in some cases, has allowed land owners who don’t pay property tax to keep operating a business on the land.

Derro said when a land owner fails to pay their taxes, the city must take certain steps to recover their money.

“When a property hits its fourth year of arrears, the Municipal Act allows us to put a lien on the property. And once we do that, the property cannot be transferred, sold, transferred or anything like that until the taxes are paid,” Derro said. “The customer has one year at that point to pay the taxes in full. At that point, we’re into the fifth year.”

We’re cautious about getting on a property that we may be ordered by the Ministry of Environment to clean up.

Tony Derro
manager of taxation, City of Greater Sudbury

Unlike many other Ontario municipalities, Derro said Sudbury offers delinquent landowners an extension agreement where they can pay their arrears off over time.

“We usually ask for about 50 per cent down, and then a certain amount every month,” he said. “So it takes care not only the arrears, but the calculations also take into account future taxes. So it’s a 23-month cycle. If the person has met their obligations at the end of the 23 months, the tax (arrears) are basically zero.”

However, when a landowner still doesn’t pay or refuses the extension agreement, the city has a right to auction the land. The sale has to be properly advertised across the province for four weeks. The city accepts sealed bids, which must include a 20 per cent down payment on the entire property.

“At the end of the process, the two highest bids on a property are set aside, and the remainder are returned to the bidders, Derro said. “The city will then contact the successful bidder.”

The winning bidder has two weeks to come up with the balance of the purchase price. If they don’t, they forfeit their deposit and the second-place bidder has a chance to complete the sale.

If the property fails to sell, the city can vest the property, but in the case of brownfields, that also means they inherit whatever environmental problems are already there. It’s that concern that keeps municipalities across Ontario from seizing brownfield lands in lieu of taxes owed.

David Petrie, an operations assistant with the Canadian Brownfield Network, said municipalities across Canada are struggling to deal with the issue of brownfields and the problem of collecting delinquent taxes from their owners.

“The issue is not just the actual remediation of the property,” said Petrie. “Under Ontario law, which is different from some other provinces, there’s a chain of custody, so to speak, for the property.”

So, for example, if Sudbury took title of a brownfield because a property owner failed to pay taxes, cleaned it up and then sold it to someone else, they could still be liable for problems in the future, Petrie said.

“Say 10 years down the road they discover that, whatever the original environmental problem was, it has caused leaching into the water table and nearby businesses and homes are affected,” he said. “Those businesses and homeowners can go back, as far back as they want to, really, to find somebody to hold liable. And municipalities are seen as a good target, particularly when the earliest owner is no longer around or doesn’t have the resources to pay.

“It becomes very, very difficult for municipalities to avoid liability.”

There are other options municipalities have developed, however. Petrie said they could hang on to the land and use it for something where the environmental risks are mitigated. If the damage isn’t too severe, they can replace the surface soil.

“Some municipalities will do what’s known as a ‘dig and dump,’ ” he said. “They dig up all the soil that’s been affected and haul it off somewhere, then replace it with clean fill.”

For lands with more serious issues, such as when there’s leaching into the water table, they may try and use it as a park, playing field or a parking lot.

“Those are the kinds of things they can do, uses where the standard of remediation isn’t as high, or the risk assessment isn’t as dire.”

At a conference in British Columbia last year, he heard about some towns in B.C. that are placing giant concrete boxes on contaminated land, filling them with clean soil, and planting urban farms inside.

“But even then there was some remediation of the soil that had to be done,” he said. “From a municipal point of view, there are not a lot of easy outs.”

All of which means municipalities have few good options when dealing with brownfield land owners who don’t pay their property taxes.

Municipalities are seen as a good target, particularly when the earliest owner ... doesn’t have the resources to pay.

David Petrie
operations assistant, Canadian Brownfield Network

Derro said the Fielding Road properties have been an issue for years.

“I can tell you that I did inherit this account at amalgamation from the Town of Walden,” Derro said. “The property is still in control of the owner throughout this process. So even when we put a lien on the property, the owner can still control what goes on there. They can still collect rents or operate a business.

“It’s only if the city sells the property does the owner lose control.”

When the city tried to sell the properties in October, they asked for $1,992,671.94 for the property at 259 Fielding Rd., and for $214,301.92 and $170,979.98 respectively for two properties at 235 Fielding Rd.

Derro said at any given time, the city is owed about $6 million in late property taxes, so the Fielding Road lands represent about one-third of that total by themselves.

“Some uncollected taxes are related to contaminated land,” Derro said. “And it’s very difficult to collect those.”

When a brownfield property fails to sell, Derro said city departments meet to try and find a way forward.

“There’s a team of staff members that work together — myself, representatives from finance, legal, building services, planning and the real estate division,” he said. “We collaborate and look at the property that didn’t sell. We evaluate the risk of taking the property over, whether or not we have a need of it, or should we just vest it. Or should we just try again (to sell it.)”

Under provincial rules, when a property being sold because of tax arrears fails to sell, the city can’t try and sell it again for two years. Derro said they’re hoping to find a solution before then.

“I can tell you that we’re active in trying to deal with it,” he said. “I wouldn’t be able to release any details on it right now, but we are active on this, let’s put it that way. We are active on any property involved in a failed tax sale. We had another sale on Sept. 27, and we’re actively working on those, as well.”


Darren MacDonald

About the Author: Darren MacDonald

Read more >