Casual Legal: Tax arrears on linear property

By Moira Lavoie
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

2021 amendments to the MGA

Various amendments to the Municipal Government Act (MGA) were made to enable municipalities to enforce payment of property taxes on linear property (i.e., oil and gas wells and pipelines) and machinery and equipment in late 2021.

Key changes include:

• Owners, and not only operators, are now also responsible for payment of property tax arrears
• Tax arrears on these properties are secured with a special lien, which applies to any and all assessable property within the municipality
• The special lien is retroactive – it secures all arrears owing as of December 2021.

Below we discuss the advantages and limits of some of the tools available to municipalities to enforce payment of property tax arrears owing on linear property. Your lawyer can advise you on which tools would be most helpful for you.

Distress remedies under the MGA

A municipality can pursue both the owner and operator of linear property on which arrears have accrued. There is a 120-day redemption period between the time the taxes are due and when the municipality can enforce its special lien against the property. Once this period ends, the municipality may, in accordance with the distress provisions of Part 10 – Division 9 of the MGA, seek to seize any of the debtor’s assessable assets within the municipality.

Caution: The municipality will require the cooperation of the Alberta Energy Regulator if it wishes to seize wellsite equipment.

Suing for the debt

As before, municipalities can choose to sue for the amount of the property tax arrears. However, legal action can now be taken against both the owner and operator of the linear property, increasing the potential assets against which judgment can be enforced. If the municipality is successful, it can register a writ of enforcement against those assets in the Personal Property Registry.

Caution: The special municipal lien has priority status, but a writ of enforcement does not.

Forcing receivership

As secured creditors, municipalities can seek to push the owner and operator of the linear property into a court-ordered receivership.

Caution: The municipality seeking receivership will be responsible for bearing the costs of that receivership. Further, any unfunded oil and gas well reclamation obligations will be paid out before the municipal tax arrears. If the value of the debtor’s assets is not enough to cover these costs and some portion of the tax arrears, this may not be a desirable option.

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.