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Real Estate

Property Tax in Ontario: A Primer

One of the most contentious issues in real estate and property is how real property taxes are assessed and charged to the property owner, of course, it is only contentious when one’s property taxes are assessed at a higher rate than it should be.

In Ontario, the Municipal Property Assessment Corporation (MPAC) is a non-profit corporation created by legislation and is governed mainly by the Assessment Act R.S.O. 1990, although it also governed by other legislation such as the Assessment Review Board Act R.S.O. 1990, and the Municipal Property Assessment Corporation Act, 1997.  MPAC’s main duty is to evaluate properties in Ontario in order to assess their tax liability and to classify them for tax purposes as either residential, commercial, industrial, farm, etc.  MPAC looks at many factors when assessing a property but most importantly the following: Sales of comparable properties; location; lot dimensions; living area; age of the property; and quality of construction.  Other factors may include such things as improvements to the property and unique and key features of the property.  Properties belonging to or being used as churches, cemeteries, public education, public hospitals, some non-profit organizations, conservation lands, and lands owned by governments are exempt from property tax.

Every few years, MPAC will determine a date to do a province wide assessment to reflect changes in the market.  The most recent date was January 1st, 2008.  All property values are deemed to be assessed as of that date and the date is known as the Current Value Assessment (CVA).  The values are then used to assess the tax liability a municipality can charge for that year and the following years up until 2012 through what is called a phased-in assessment.   Whenever ownership of a property changes; MPAC will send an assessment notice to the property owner notifying them of the January 1, 2008 CVA and the foregoing 2009, 2010, 2011 and 2012 future value assessments.  For example, John buys a property for $645,000.00 in July of 2009.  Near the beginning of 2010, he receives an assessment notice stating that the current value (based on January 1, 2008) is $705,000.00.  While at first John thinks great his property is worth $60,000.00 more than he paid (according only to MPAC), he then realizes that he may be paying taxes on the higher assessed value than what the more accurate value, being the market price he actually paid.  Not only is the current value inaccurate based on what John paid, but because MPAC uses the current value to determine the upcoming values until 2012, John will be paying more tax than he should be until 2012.

When the above scenario occurs, the property owner is entitled to seek a Request for Reconsideration (RfR).  When applying for the RfR, the owner will have to provide supporting documentation in order to justify his/her reasons for a lower tax assessment.  Supporting documentation includes a copy of the agreement of purchase and sale and the statement of adjustments which shows the accurate price that the owner actually paid for the property.  Once submitted, MPAC may revise their assessment and send the owner Minutes of Settlement for their consideration.  If the owner accepts MPAC’s revised assessment, then the matter is finished and the owner will pay taxes based on the revised values.  If MPAC does not revise their assessment or if the owner does not agree to the revised assessment, then the owner can appeal to the Assessment Review Board (ARB).   The deadline to file for an RfR is March 31stof the taxation year.  The ARB is formal procedure that involves providing statements of issue, pre-hearings and hearings and is governed by the ARB’s rules of practice and procedure.

If you believe your taxes have been assessed too high and you need guidance on filing an RfR or subsequent appeal, contact one of the lawyers at Levy Zavet for a free consultation in order to see whether we can save you money on the taxes you pay for any type of property you own.

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