Canada: Contaminated Property Tax Assessment Reduced To Zero

In a recently reported decision of the Ontario Assessment Review Board in Mifran Investments Limited, the Board ordered the property tax assessment on a contaminated property reduced to zero.

The lands in question are located in an industrial area of the City of Brampton. They have an area of 0.39 acres and are improved with an industrial building of 3,600 square feet and some accessory office space. As a result of nickel plating activities carried on by a prior owner, both the soil and portions of the exterior wall of the building were contaminated with chromium.

The initial position taken by MPAC, the provincial agency responsible for establishing land values for the purposes of municipal taxes, was that it was prepared to reduce the land value by 50%, but maintain the building value as they had costed it in accordance with their normal practice. The owner rejected this offer on the basis that they were obliged to proceed with remediation of the property and that the cost of clean-up would considerably exceed the market value of the property.

A key factual element of the case was that the owner had negotiated a conditional agreement of purchase and sale for the property. This sale was not completed by reason of the chromium contamination and the owner undertook to clean up the property. The cost of remediation and loss of revenue was determined to be in the order of $675,000. Subsequent to remediation, the property sold for $375,000. On the basis of the difference between the cost of remediation and the ultimate selling price, the Assessment Review Board decided that for the taxation year in question, when the lands were undergoing the remediation, the property had no value.

In coming to its conclusion on the issue, the Board appeared to put significant emphasis on the obligation under the revised Assessment Act that the assessed value was to be based upon "current value" as defined in the Act. Current value is intended to reflect the amount of money the fee simple interest in the land would realize if sold at arm’s length by a willing seller to a willing buyer. MPAC argued against this interpretation, based on the equity provisions of the Assessment Act, which indicate that in determining the value at which any land should be assessed, reference is to be had to the value at which similar lands in the vicinity are assessed.

This latter provision used to have considerably more influence in the decision making of the Assessment Review Board, when assessed values did not track the market. With the amendment to the legislation effective in 1998, the approach of the Assessment Review Board has changed and much more weight is put on the principle of "current value".

As a result of their decision, complaints with respect to assessed value can quite legitimately take into account any known contamination of the property and the effect of that contamination on the actual market value of that property. While publicizing the fact that one’s property is contaminated may not be easy to do, if you have an old industrial property that is going nowhere fast, it is likely time to have the municipality share in your pain.

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