All properties in Ontario will receive new notices
of assessment in 2008 that will serve as the basis for
municipal property taxation for 2009 to 2012. In accordance
with the requirements of the Assessment Act, these new
assessments will be based on January 1, 2008 "current
values" determined by the Municipal Property Assessment
Corporation (MPAC). However, the meaning of "current
value" has been thrown into uncertainty as a result of the
recent decision of the Assessment Review Board in the
"Bank Towers" case (BCE Place Limited et.
al. and Municipal Property Assessment Corporation
and City of Toronto).
In 1997, the Assessment Act was amended to require
all real property in Ontario to be assessed on the basis of
"current value," which the Act defines as "the
amount of money the fee simple, if unencumbered, would realize
if sold at arm's length by a willing seller to a
In assessing the Bank Towers, and indeed all other
commercial property in Ontario, MPAC took the position that
"current value" is not restricted to the fee simple
interest of the owner of land. Rather, the definition of
"current value" requires that all interests in land
be assessed, including all estates, terms, easements and rights
in land, including tenants' interests. MPAC also
submitted that the phrase "if unencumbered" had no
technical meaning, and that an encumbrance is an interest in
land that diminishes its value.
The Assessment Review Board disagreed. It held that
"current value" meant that only the owner's
interest in real property is to be valued, and that the
valuation is to be done as if property is vacant and
untenanted. According to the Board, a tenant's interest
in land under a lease is only a personal property interest, and
is not relevant to the valuation of real property under the
Assessment Act. The Board accordingly found that
MPAC's valuation methodology of valuing the "full
bundle of interests, including those of the landlord and the
tenant" to be incorrect in law.
Both MPAC and the City of Toronto have requested leave to
appeal the Assessment Review Board decision to the Divisional
Court. One of the critical issues to be determined is whether
the decision of the Assessment Review Board on the meaning of
"current value" is consistent with a decision of the
Court of Appeal that was released on January 14 in
Carsons' Camp Limited and Municipal
Property Assessment Corporation et. al. At issue in that
case were third-party owned trailers that were affixed to an
owner's land, which MPAC had included in determining
"current value". The Court of Appeal upheld
MPAC's assessment (and overturned a lower court
decision), concluding that "the [Assessment] Act
contemplates assessment of all that falls within the expanded
definition of land despite the use of the words 'fee
The Carsons' Camp decision was presented and argued
before the Assessment Review Board in the Bank Towers case.
However, the Board found that this Court of Appeal decision
"was not germane to the case at hand" as it did not
deal with "the issue of valuing the interests of the
tenants for the purposes of assessment, nor does it deal with
the meaning of the word 'encumbrance' or the
meaning of the phrase 'as if unencumbered.'
Regardless of whether the Assessment Review Board was
correct in distinguishing the Court of Appeal's
decision, its finding that only the owner's fee simple
interest is to be valued is at odds with MPAC's
interpretation of "current value" and its valuation
methodology of assessing all interests in land. MPAC is
currently finalizing the January 1, 2008 current values that
will be the basis of the 2009 to 2012 assessments of all
properties on Ontario. It is reasonable to anticipate that,
notwithstanding the Assessment Review Board's decision
in the Bank Towers case, MPAC will continue its practice of
valuing land to include all interests, and not just the fee
simple interest of owners as the Assessment Review Board has
Assuming that the Divisional Court grants leave to appeal
the Board's decision, the meaning of "current
value" will likely remain the subject of conflicting
interpretations for some time. Commercial property owners in
particular will likely be obliged to appeal their new
assessments as determined by MPAC to the Assessment Review
Board pending a final court resolution of this fundamental
issue. As a result, both taxpayers and municipalities will face
continuing property tax uncertainty that will reasonably
continue well into the new four-year reassessment cycle.
* This article originally appeared in the June 6, 2008
issue of The Lawyers Weekly published by LexisNexis Canada
Michael Bowman is a partner in the
Litigation Department in Toronto.
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general guide to the subject matter. Specialist advice should
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