Owners or tenants of commercial/industrial property in Ontario
should be aware of recent increases in property tax assessments
made by Ontario's assessing authority, the Municipal Property
Assessment Corporation (MPAC).
Especially in the City of Toronto, MPAC is valuing many
properties on the basis of their "highest and best
use" (HABU) rather than their actual use.These assessments
have led to some significant property tax increases. For example,
some owners of retail/office properties have seen their taxes more
than double because MPAC has determined that the property's
HABU is something other than its current use.
HABU is an appraisal concept that focuses on the
"reasonably probable use" of a property that is fiscally
possible, appropriately supported, financially feasible, and
produces the highest property value. All four of these
"tests" must be satisfied in order for a property's
true HABU to be determined.
Given recent development activity, particularly in Toronto, MPAC
is producing aggressive property valuations based on its perception
of the market and its often flawed analysis of the impact of zoning
changes (both real and perceived) on the market value of a
Last fall, MPAC sent assessment notices to all property owners
in Ontario. These notices set out the new assessed values for the
current 2013- 2016 property tax assessment cycle. All real property
was re-valued using an effective valuation date of January 1, 2012.
Property owners should review these notices, or their municipal
property tax bills, to determine if they have experienced
If you are faced with a HABU valuation, you should seek
professional property tax advice. Your advisor will review the
valuation with you and determine how it can be challenged. Among
other things, the land sales used by MPAC
to derive the redevelopment value should be analyzed to ensure that
they are true "comparable" sales. In addition, the zoning
designations of all "comparable sales" as well as of the
subject property must be carefully reviewed to see whether it is
feasible that redevelopment would occur on the property during the
taxation years in question.
Finally, as noted above, tenants could also be impacted by HABU
assessments. This is especially true for larger tenants, such as
big box or other large commercial retailers, who are single-
occupants of space. A tenant who is the sole occupant of a building
and responsible for paying all property taxes could see a huge
increase in its tax burden if that building has been assessed using
Property owners, and large tenants, should not take HABU tax
assessments for granted. It is well worth the time and investment
to review and, if necessary, challenge your assessment.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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