Thank you for all the suggestions. I've faxed the letter to my lawyer right after I got the letter. So far, did't hear anything back from my lawyer.
The City of Ottawa letter says:
The City has recently been advised that you are the new owner of the property described above.
This notice is to advise you that there was an outstanding water account balance for your property from the previous owner. According to the Municipal Act 2001, Section 398 (2), unpaid costs of water supply and distribution can be recovered as a lien against property. Therefore, this amount has now been transferred to your water account.