This presentation deals with the assessment and taxation of residential condominium units in Ontario. The following areas will be covered in the presentation.
- Basic property tax system in Ontario;
- A request for review of MPAC assessments of condominium units;
- Appeal to the Assessment Review Board;
- Condominium Corporation objections to assessments under The Assessment Act on behalf of condominium owners.
Overview of the Ontario Assessment Act
The provincial government passes legislation, sets assessment policies and determines the education tax rates. Then the Municipal Property Assessment Corporation (“MPAC”) decides what the current value of the condominium unit is, the assessment value and the classification for the condominium unit. The City then determines its revenue requirements and establishes a municipal tax rate, and then proceeds to collect property taxes from the condominium unit as municipal taxes. Finally, the Assessment Review Board is an independent body or tribunal that reviews by way of an appeal from property owners their assessed value for the condominium unit.
At the present time, condominiums in Ontario have an assessed value as of 2008 and this value will be used until 2012.
The assessment for a condominium unit and the realty taxes for the condominium unit are different things. MPAC provides an assessment roll to the City each year that includes the assessed value of the condominium unit. The City then takes over and applies its mill rate to the assessment for each property in order to arrive at the amount of tax that will be charged to that condominium unit in that year. The assessed value is multiplied by the mill rate to arrive at the taxes payable.
Mill rates are determined by a budgetary process of the City that is completed each year. The City receives the assessed values from the Ministry of Revenue and determines what factors or mill rates will be necessary to produce tax revenues that will meet the revenue needs of the City for its services and school boards. The City then fixes its mill rates accordingly.
Each city has different mill rates depending on the type of property and the school support designation. The usual difference in mill rates is based on the type of property involved. For commercial/industrial properties that are occupied, there is a commercial mill rate that is used. For residential properties there is a residential mill rate that is applied.
The condominium unit owner can simply contact MPAC to verify the details about their property and to find out about the current value assessment. The owner can also ask about similar properties and how they are valued. If the condominium unit owner is still not satisfied with the responses and the way that the assessed value was determined, then there are certain procedures to be followed to have the assessed value reconsidered.
Request for Reconsideration
The condominium unit owner can file a request for reconsideration (RFR) with MPAC. This is a very informal process, inexpensive and relatively fast. There is no charge for filing an RFR. Since I’ve assumed that the condominium unit is a residential unit, the unit owner must file an RFP with MPAC before being able to file an appeal to the Assessment Review Board (ARB). An RFR must be filed no later than March 31st in the tax year for which the assessment applies.
An RFR must be in writing. It can either be by way of a letter or on the form that has been prepared already in blank by MPAC. The RFR form is available on the MPAC website. Attached as an exhibit to this presentation is a copy of the blank RFR form of MPAC as of the date of this seminar. The basis for the requested review of the assessed value must be set out and the relevant factors such as other properties that are comparable, any sales information, differences in the attributes of the unit that MPAC has used to come to an assessed value, etc. For example, the following are some common reasons why a condominium unit owner might file an RFR.
- The assessed value of the unit appears to be different from similar condominium units in the vicinity.
- The condominium unit has been incorrectly classified.
- MPAC’s records are incorrect, ie. the size of the unit, the number of bathrooms, etc.
- The condominium unit was purchased close to the valuation date at a significantly different amount than the assessed value.
On receiving the RFR, MPAC will provide information about how the condominium unit was assessed. MPAC will review the concerns that have been raised by the condo unit owner and may contact you for additional information. That information could include making a visit to the condominium unit to see whether or not there have been any changes since MPAC’s last visit, and this could increase the assessed value if substantial changes have been made that are not reflected in the assessed value. After all of this has been done, MPAC provides a written response by September 30th of that tax year and this may be extended on consent to November 30th. Also attached to this presentation is a condominium data collection template that is used by MPAC to collect information concerning the value of condominium units.
Assessment Review Board Appeal
The owner of a condominium unit may file an appeal with the Assessment Review Board (ARB”). The ARB is independent. It is a tribual established by the Province of Ontario through the Ministry of the Attorney General. The ARB hears appeals from people who believe that their properties are incorrectly assessed or classified.
There are specific forms that have to be used and fees for filing an appeal with the ARB. The ARB has a set of rules that it has established for hearing appeals from the assessed value of properties. Specific forms and time lines are set out in the rules. A condominium unit owner would have to appear at the ARB hearing to support their appeal. MPAC will also appear at the hearing, and the City could appear as well, although it usually does not.
The deadline for filing an appeal with the ARB is March 31st of the tax year. In other words, even though you may have filed an RFR with MPAC, if you haven’t got a decision yet then you have to file an appeal to the ARB to protect your position and be able to appeal to the ARB.
The hearing process is like a trial. There is a single member of the ARB that hears the evidence and initially MPAC has the onus to prove the accuracy of the assessed value. Usually MPAC will put forward comparable properties as evidence and shares this information with the condominium unit owner in advance. A notice of decision is sent out by the ARB to the condominium unit owner, MPAC and the City. MPAC then updates its records and if there is a change in the classification or current value, then the City will adjust the property taxes at that point. It is possible to request the ARB to review its decision, although this is not done very often. A decision of the ARB may be appealed to the Divisional Court, but only on questions of law. A lawyer should be retained if you are going to take that route.
Condominium Corporation Assessment Reviews on Behalf of Condominium Unit Owners
The Condominum Act, 1998 (the “Condo Act”) allows a condominium corporation to object, on behalf of all the condominium unit owners, to a tax assessment affecting the units. This law is to try and remove the procedural problems that might be encountered by a condominium corporation when all of the condominium units are affected by a MPAC assessed value and there would be no other method of representing all of the condominium unit owners on the review. The other benefit is that this will enable to condominium corporation to finance the assessment review and appeal through the common expenses of the condominium unit owners.
The Condo Act provides in Section 56(1)(f) as follows:
“56. (1) The board may, by resolution, make, amend or repeal by-laws, not contrary to this Act or to the declaration, …….
(f) to authorize the corporation to object to assessments under the Assessment Act on behalf of owners if it gives notice of the objections to the owners, and to authorize the defraying of costs of objections out of the common expenses; ….
(4) If the board has made a by-law under clause (1) (f), the corporation shall have the capacity and authority to appeal under section 40 of the Assessment Act on behalf of owners but shall not be liable for an alteration in the assessment of a unit or for any other matter relating to the appeal, except for the costs of the appeal. 2008, c. 7, Sched. A, s. 18.
(5) Despite a by-law made under clause (1) (f), on written notice to the board and to the Assessment Review Board given before the hearing of an appeal under section 40 of the Assessment Act, an owner may withdraw an appeal that the corporation has made on the owner’s behalf. 2008, c. 7, Sched. A, s. 18.
(9) For each by-law of a corporation, an officer of the corporation shall certify a copy of the by-law as a true copy and the corporation shall register the copy in,
(a) the land titles division of the land registry office within the boundaries of which division the land described in the description is situated, if the land registry office has a land titles division; or
(b) the registry division of the land registry office within the boundaries of which division the land described in the description is situated, if the land registry office does not have a land titles division. 1998, c. 19, s. 56 (9).
When by-law effective
(10) A by-law is not effective until,
(a) the owners of a majority of the units of the corporation vote in favour of confirming it, with or without amendment; and
(b) a copy of it is registered in accordance with subsection (9). 1998, c. 19, s. 56 (10).”
If a condominium board of directors wants to appeal assessments on behalf of owners of condo units, it has to pass a resolution of the board making a specific by-law to authorize the condominium corporation to object to the assessments under the Assessment Act. This objection is on behalf of the owners of the condominium units and it is necessary that the board give notice of the objections to the unit owners. The purpose of the by-law is to authorize the payment of costs of objections out of the common expenses of the condominium corporation that it collects from the the unit owners.
For a by-law passed by the board of directors relating to objections for assessments under the Assessment Act (“Assessment By-Laws”), the by-law must meet certain requirements before it is effective. The by-law is not effective until the owners of a majority of the units of the condominium corporation vote in favour of confirming it, with or without amendment, and a copy of the by-law has to be registered in accordance with the Condo Act.
The Assessment By-Law must be registered in the Land Titles Office. A certified copy of the by-law is registered. The purpose of the by-law being registered is so that any purchasers of the condominium units will have notice of that by-law being in effect. As well, since the by-law is not effective unless a majority of the owners of the units vote in favour of it, then the current owners of the units will have notice of the by-law being passed.
Once the Assessment By-Law is passed, then the condominium corporation has the capacity and authority to appeal under Section 40 of the Assessment Act on behalf of the individual unit owners. The condominium corporation is specifically exempted from any liability for an alteration in the assessement of a condominium unit or for any other matter relating to the appeal, except for the costs of the appeal. In other words, if the appeal results in a higher assessed value, or if the appeal is unsuccessful and no appeal can be launched by an individual unit owner for that same taxation year, then no claim is available against the condominium corporation by the individual unit owners. The condominium corporation is responsible for the costs of the appeal. In other words, the ARB can award costs of the hearing against the condominium corporation, and those costs would then be added to the common expenses of the condominium corporation and would therefore be paid for by the individual unit owners. As well, the legal and other costs of the condominium corporation in appealing the assessment would also be added to the common expenses.
The specific Assessment By-Law would simply say that the costs of objections are added to the common expenses. Since the declaration of the condominium corporation sets out what percentage of the common expenses each unit holder is responsible for, each unit owner pays its share of these costs of an appeal.
The Condo Act provides that a unit owner, on written notice to the board of directors, and to the ARB, may withdraw an appeal that the corporation has made on the owner’s behalf. This written notice must be given before the hearing of the appeal. Even though a unit owner may withdraw an appeal that has been made on the owner’s behalf, that does not mean that the unit owner who has withdrawn will not be responsible for its percentage share of the costs of the appeal. In fact, the opposite is true. As set out above, the Assessment By-Law would normally provide that the costs of the appeal are added to the common expenses, and once that is done then all of the condominium unit owners would be responsible for their share of those costs as part of the common expenses. Since the declaration sets out what the percentage contribution of each unit owner is to the common expenses, it is arguable that the only way to exclude costs of the appeal from all of the common expenses would be to amend the declaration, which requires the approval of almost all of the condominium unit owners.
The Condo Act sections that allow a condominium corporation to pass an Assessment By-Law are still relatively new. There have not yet been any cases providing more clarity on the extent of the application and limits, if any, on this kind of a by-law. There are also not any ARB decisions that I am aware of relating to an appeal by a condominium corporation of an assessment on behalf of the unit owners. As cases are heard, the limitations and requirements for the process of a condominium corporation appealing property assessments on behalf of its unit owners will evolve. It will also be of interest to see the circumstances, if any, under which the ARB and judges will protect or require corporations to pay costs associated with the appeal process.
In summary, there are certain things that should be realized when a condominium corporation is in the process of passing an Assessment By-Law, and some of those things are as follows.
- The directors have to pass a specific by-law authorizing the condominium corporation to make such appeals.
- The by-laws has to be approved by a majority of the unit owners to be effective.
- Once a by-law is passed, then the costs of the appeal will apply to all unit owners even if some owners have withdrawn from the appeal process.
- There are risks to the owners of the units when the appeal is made, and this can include a costs award against the condominium corporation which will be added to the common expenses.
- Another risk to the unit owners is that if the property’s value is found to be higher, then they are bound by the decision for at least that year.
- The unit owner does not get to have an appeal of the assessed value without any cost, the costs of the appeal come out of the common expenses.
In conclusion, the owners of condominium units should be aware of the assessed value of their condominium units and how that impacts on their taxes. There are procedures available to the individual unit owners to have the assessed value reviewed, and if necessary appealed to the ARB. There are costs involved in proceeding to an ARB appeal, and if there are sufficient common interests to the various unit owners, then there may be a benefit to having those costs spread over all the unit owners.
The Condominium Act provides for a method of passing a by-law to allow the condominium corporation to object to assessments on behalf of the owners. Even if the by-law is passed, before the condominium corporation can proceed with the objection to assessment it has to give notice of the objection to the owners involved, and that objection could end up in additional common expenses being paid by the unit owners for the cost of the objection.MPAC Request for Reconsideration
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