Property Owners should be aware of changes and deadlines related to the Vacancy Rebate program

February begins deadline season in the Ontario property tax world. Since 2002, the end of February has been the deadline for owners of commercial and industrial properties to file an application for a rebate of taxes paid on vacant space. The vacancy rebate program was initiated to offset the increase in commercial and industrial tax rates created when the business tax was eliminated in 1998. Twenty years later, the vacancy rebate program is coming to an end. Property owners should be aware of the potentially significant impact on operating costs, which is not presently reflected in assessed values. The deadline for 2017 Vacancy Rebate applications is Feb 28, 2018.

For properties not currently under appeal, the Assessment Review Board filing deadline is April 3, 2018.

Spurred by a request from the City of Toronto, in 2017 the Ontario Ministry of Finance announced that it would provide municipalities the options of modifying or eliminating the vacancy rebate program, provided they first consult with the business community. On behalf of a number of our clients and in association with organizations such as Realpac and the London Chamber of Commerce, Altus prepared submissions to a number of municipalities in support of continuing the program. In most cases, enticed by the prospect of millions of dollars in additional revenue, municipalities have decided to end the program. Some have been quicker than others.

In Toronto, the rebate will be phased out by July 1, 2019. Ottawa is ending the program effective Jan, 1, 2020. Most municipalities in Southwestern Ontario took a ‘wait and see’ approach; London announced at the end of 2017 that its vacancy rebate would be cut in half by 2018 and eliminated in 2019. More announcements are forthcoming, with a new regulation implementing further changes expected to be issued in March.

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Outside of Brantford and Oxford County, most municipalities in Southwestern Ontario have maintained the vacancy rebate for 2017 at 30% for commercial properties and 35% for industrial properties, but we anticipate sharp reductions to rebates for 2018, and that most will be eliminated by 2019 or 2020.

The elimination of the vacancy rebate comes at a time when businesses across the region are struggling to implement the changes in the Employment Act. Furthermore, retail property owners, already grappling with the rise of online shopping and the demise of major retailers, were hit with assessment and tax increases as a result of the 2017-2020 reassessment. All of these factors are contributing to increased operating costs, which in many cases cannot be fully recovered from tenants already facing financial challenges.

Decreasing revenues and increasing operating costs lead to economic obsolescence. Elimination of the vacancy rebate may lead to a loss in value for vacant properties relative to comparable, occupied properties. We expect to be raising this issue through our assessment appeals. Ontario is presently in the second year of the 2017-2020 assessment cycle and the Assessment Review Board has just begun to address appeals filed in 2017; for those properties, ‘deemed’ complaints will be created for 2018. For any properties requiring a new appeal, deadlines are April 2 and April 3, 2018.

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