How is property tax adjusted when a business sale includes real estate?

Property tax is billed annually or in instalments on the municipality’s own schedule, which rarely lines up with an actual closing date, and that mismatch is exactly why an adjustment mechanism exists at closing at all.

The statement of adjustments is where this gets settled

Lawyers on both sides prepare a statement of adjustments as part of closing, itemizing prorated property tax alongside other prepaid or owing amounts tied to the property, so the actual cash exchanged on closing day reflects each party’s true share rather than whatever the last tax bill happened to say.

A change of ownership can also trigger a reassessment

Many provinces reassess a property’s value on a change of ownership or otherwise revisit assessments periodically, which can change the tax bill going forward independent of the adjustment made at closing. A buyer should ask their lawyer or the municipality what to expect afterward, rather than assuming next year’s bill will match this year’s.

For leased premises, this shows up as CAM, not a direct tax bill

A tenant does not receive a municipal tax bill directly. Property tax on leased premises is typically passed through as part of common area or additional rent charges, reconciled the same way other operating costs are — a separate mechanism from the closing-day adjustment, which applies only when real property itself changes hands.

This is proration, not a new tax

The adjustment does not create any new liability; it divides an existing bill fairly between the two owners who each held the property for part of the relevant period. Confirm the specific mechanics and current figures with your lawyer and the municipality, since neither is something to estimate from general reading, and the same proration logic applies whether the property is a small commercial unit or a larger mixed-use building.