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MUNICIPAL PROPERTY TAXES

CHANGES IN THE LAW:

Substantial changes have been made in municipal property tax law by virtue of an act known as "The Fair Municipal Finance Act" (which I will call the Act) which law was effective as of December 1st, 1997.

The theory of this Act is that a market value assessment system will be imposed upon the province and that the valuation of each property will be determined on a changing average, which average will be the average of value on June 30th in the three most recent years at any given time. This process is to take place over ten years.

For the years 1997, l998 and 1999, the market value of land was determined as of June 30th, 1996.

Business taxes are eliminated and the manner of dealing with this lost revenue has been individually determined by each Municipality.

Properties are now taxed at different rates of assessment depending on which "class" they fall into. Each Municipality is able to determine what the mill rate will be for any given class. Although there may be different classes added to the current list, the classes now existing are residential, multi-residential, industrial, commercial, farm/managed forest and pipeline.

The province will need to determine what the fair market value of each particular property is and will attempt to do so and advise property owners through notices as to the determined value. Some input is sought through property owners in determining these values through circulated documentation.

You may not agree with the fair market value determined by the province and if so, appeals will be available to the Assessment Review Board. Formerly appeals from the Assessment Review Board were to the Ontario Municipal Board but now they are to the Divisional Court and only on certain narrow types of legal questions.

As most of us are aware, property owners used to receive a Notice of Assessment towards the end of the year and were given a very short period of time to object or appeal. As a result of political pressure, the Province of Ontario decided to extend this appeal period and make it longer. The appeal period is now until March 3lst of any given year. With respect to the extended appeal period, it is hoped that the assessment officers and individuals will be able to resolve disputes by way of agreement rather than by way of formal appeal and to this extent assessment officers have been given different powers than they had before.

Formerly, the properties were determined to be used for one particular purpose based on what the predominate use was. However, under the new system, the "class" of use can be split on a proportional basis and the different rates can be multiplied against the portion of each individual class.

CONCERNS FOR COMMERCIAL TENANTS AND LANDLORDS:

As noted above, there is no longer any business taxes assessed against properties in the Province of Ontario. Many existing leases anticipate that there are business taxes and proportional costs are assessed either against the tenant or the landlord based on this assumption.

Furthermore, many commercial leases deal with the issue of Business Improvement Areas (BIA). This raises both the question as to whether BIAs will continue to exist and how landlords and tenants will deal with the allocation of BIA costs as they are, or may be reassessed in the future.

The Act also has the effect in many cases of changing that proportion of municipal property taxes that an individual unit bears to whole building (because of the change in class allocation) and municipalities will are charging a greater proportion of municipal property taxes to businesses than they have previously. This further complicate the arrangements between landlords and tenants.

There is, unfortunately, no magic formula for dealing with this situation and it will remain to see whether or not certain patterns emerge as models for settling disputes between landlords and tenants in this regard. It may well be that a method of arbitration and/or mediation will be desirable in landlord and tenant situations as a tool for resolving these outstanding issues. In any case, any commercial landlord or commercial tenant should be aware of these changes in the law and take them into account when renegotiating or renewing any existing leasehold agreements so that new agreements can be made, and disputes avoided in the future.

In the event that any taxpayer, commercial landlord, or tenant wishes to further review these changes in the law, we would suggest that you contact a solicitor. If you are in the Midland/Penetanguishene/Georgian Bay area, Deacon Taws Law Firm would be pleased to assist.

 

The foregoing articles are meant for informational purposes only and are not to be taken as legal advice. In the case of any questions, issues or needs arising from the above please contact us at Admin@deacontaws.com, Phone: (705)526-3791 or Fax: (705)526-2688

 

 

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