When the City Tells Your Commercial Tenant to Pay Rent to the Tax Collector: Ontario’s Tax-Recovery-from-Tenant Rule

An owner’s unpaid property tax can reach the people who rent from them. Here is how section 350 of the Municipal Act routes rent to the treasurer, where it stops, and which section Toronto uses instead.

I’m Arthur Zhao, a real estate Broker in Toronto. Start with the owner, not the tenant. A commercial property owner’s tax instalments go unpaid. The municipality now holds a debt, and the Municipal Act gives its treasurer several ways to collect it: sue for it, rely on the lien it already has on the land, seize the owner’s goods, or, if the arrears sit long enough, put the property on the road to a tax sale.

One of those tools does not go through the owner at all. It goes through whoever is paying the owner rent. That is section 350, and it is why a tenant who has never been late on a payment can receive a letter from the tax office. This article walks through where that rule sits among the municipality’s options, what it asks of a commercial tenant, how far it reaches, and how the money squares up with the landlord afterwards.

The municipality’s collection tools, and where s.350 fits

Part X (Tax Collection) and Part XI (Sale of Land for Tax Arrears) of the Municipal Act, 2001 set out how a municipality recovers taxes that are owing. Lined up side by side, the tools differ mainly in whose money or property they reach:

• Debt action (s.349(1)). Taxes may be recovered with costs “as a debt due to the municipality” from the taxpayer originally assessed and from any subsequent owner of the land.
• Special lien (s.349(3)). Taxes are a special lien on the land “in priority to every claim, privilege, lien or encumbrance of every person except the Crown.”
• Seizure of personal property (s.351(1)). If taxes remain unpaid after the due date, the treasurer may seize the taxpayer’s personal property, and certain other property on the land, to recover the taxes and the costs of seizure.
• Tax arrears certificate and sale (s.373). Where tax arrears are owing on January 1 in the second year after the taxes became owing, the treasurer may register a tax arrears certificate on title. The certificate states the land will be sold by public sale if the cancellation price is not paid within one year of registration.

Section 350 is one more tool, and the only one in this list aimed at a third party: the tenant. According to the Government of Ontario’s e-Laws consolidation of the Municipal Act, 2001 (2026), s.350(1) applies “where taxes are owed in respect of any land occupied by a tenant.” Unlike s.373, the text of s.350 does not set a waiting period before the treasurer can use it.

In Toronto, the rule is s.315 of the City of Toronto Act

If the property is in Toronto, the Municipal Act section is the wrong citation. Section 7.1(1) of the Municipal Act, 2001 says that Act does not apply to the City of Toronto, except as otherwise provided. Toronto’s tax collection rules live in Part XIII of the City of Toronto Act, 2006 (tax sales are in Part XIV), and the tenant rule is s.315. Its three subsections match Municipal Act s.350 word for word, with “city treasurer” and “the City” in place of the treasurer and the municipality.

The neighbouring sections line up the same way: COTA s.314 is the debt and special-lien section, s.316 is the seizure section, and s.344 is the tax arrears certificate.

One trap when reading a Toronto file: section 350 of the City of Toronto Act is a different provision. It sits in the tax-sale Part and deals with the final notice sent when the cancellation price is still unpaid 280 days after a tax arrears certificate is registered. A letter or a memo that cites “s.350” for a Toronto tenant notice has the section number from the wrong statute.

After the notice: where each rent payment goes

Section 350(1) has three moving parts: a written notice from the treasurer, rent paid “as it becomes due,” and a ceiling of “the amount of the taxes due and unpaid plus costs.” Read together, the notice does not ask the tenant to write one cheque for the whole tax bill. It redirects the payments the lease already requires, on the dates the lease already sets, until the ceiling is reached. The sequence below follows one rent period at a time.

Where each side stands once the notice is served

Reading the property-tax clauses in your lease

Section 350(3) is the bridge back to the lease. It lets the tenant deduct from rent the amounts paid to the treasurer “that, as between the tenant and the landlord, the latter ought to have paid.” The phrase “as between the tenant and the landlord” points to the arrangement the two of them made, so the lease is where the answer to “who ought to have paid” starts.

• If the lease has the landlord paying property tax out of the base rent, the tax the treasurer collected is, on the lease’s terms, the landlord’s cost. That fits the s.350(3) wording directly.
• If the lease makes the tenant pay a share of property tax (a net lease, or a tax recovery billed as additional rent), the picture is less clean. Part of the arrears the treasurer is collecting may relate to tax the tenant was already funding through the landlord. The Act does not directly say how that share is treated under s.350(3), or whether a separately billed tax recovery is “rent” for s.350(1). That is a question for the lease and, if the numbers matter, a lawyer.
• If the lease says the tenant must pay rent only to the landlord, keep in mind that s.350(1) is a statutory direction: “the tenant shall comply with the notice.” The Act does not directly say whether a lease can contract out of it, and I would not assume it can.

Pull the lease out before the next rent date, find the definitions of rent, additional rent and taxes, and note which of these situations you are in.

The treasurer collects like a landlord, but is not your landlord

Section 350(2) has two halves, and both matter for a commercial tenant.

The first half gives the treasurer “the same authority as the landlord of the premises to collect the rent by seizure or otherwise”, to the amount of the taxes due and unpaid and costs. In other words, once a notice is in place, the treasurer is not limited to asking politely; it steps into the landlord’s collection position for that rent.

The second half is the limit: “collecting the rent does not impose upon the treasurer or the municipality the responsibilities of a landlord.” Repairs, services and every other obligation the lease places on the landlord are not transferred to the treasurer by the notice. The Act does not say those obligations are suspended either. According to the Government of Ontario’s e-Laws consolidation of the City of Toronto Act, 2006 (2026), s.315(2) says the same of the city treasurer and the City.

So the treasurer is the party you pay; the landlord is still the party you deal with on everything else in the lease.

What to do once a treasurer’s notice arrives

Organised by who you are dealing with: