The municipality uses the assessed value of your property and
multiplies that value by the municipal tax rate for your property
class to get the calculated taxes.
There are five basic tax rates:
- Residential
- Farm
- Multi-Residential
- Commercial
- Industrial
Many Municipalities have separate rates for vacant commercial
and excess land and others have tax rates for large commercial
properties such as shopping centers and large industrial
complexes. Many times your assessed value is correct but the
code applied to your property is incorrect and thus you have the
wrong tax rate applied to the assessment.
In 1998, the Ontario government passed Bill 79 that introduced tax capping for commercial, industrial and
multi-residential properties. This capping process would only allow these property types to increase in
taxes by 10-5-5 percentages over the three-year period from the 1997 taxes. This change has complicated
the tax calculation and many Municipalities have hired consulting firms to assist in the calculation of
your tax bill. Although this legislation was beneficial for those who saw large increases in taxes due to
the reassessment, it was not that beneficial for those property owners who had been over-paying for many
years. Those who were over paying for years were asked to still help those who were under paying by phasing
in their tax decreases over the same time period. The Ontario Government has a new bill 140 to extend this
tax-capping program for additional years at 5% - 10% per year. Therefore, depending on the local municipal
decision this may still force those currently paying too high a tax bill to continue to support those who
should be at the higher tax. This provision was changed in bill 140 and left to the local council as to how
they would fund the tax decreases due to the capping program.
- The Municipal Property Assessment Corporation is mandated by the Ontario Legislature (Assessment Act) to
reassess your property annually. In 2003 they commenced this annual reassessment.
- In 2005, the new provincial government reinstituted this annual reassessment program after putting a moratorium on it for one year in 2005.
- This reassessment is to maintain a current level of value
on your property so that the equality of the assessment values
do not become outdated as they did in the past. Up until 1998,
many municipalities across Ontario were not reassessed since
the middle 1950's and their valuation date was at approximately
1949 levels.
Your taxes can go up for many different reasons. Some of these
reasons are:
- Your municipality spends more money and therefore has to raise
the tax rate in your area.
- The property values in your area due to market forces
increase faster than in other areas.
- There is a downturn in the economy and there are many
plant closures that put more stress on the other property
owners to pick up the needed amount of tax to operate the
municipality.
- There is insufficient sales information in your area and
the assessor has to use sales data from another area to
support your valuation. Many times this could cause a
significant increase in your area due to a lack if information.
Sometimes historical information is not used to justify the
difference between one area and another area.
- Rental incomes increase on your property due to market
demand that could translate into a higher property value than
in the past. This could also be caused by a lower vacancy
allowance than in the last reassessment. This is primarily on
investment type properties such as apartments, offices,
shopping plazas and centers.
- There is a calculation or input error.
- There is an error in the information gathered from your
property.
- There is an error in square footage of your buildings or
land size.
- The wrong land rate was used on your property.
- Your buildings are rated too high and therefore the replacement
cost is too high.
- There is an improper cost adjustment factor on your
structures.
- The depreciation on your buildings is not adequate due to
condition.
- Functional obsolescence on older buildings has not been
considered.
- Economic obsolescence has not been considered.
- Your location in relation to better-located properties is
not considered.
- Policy or procedural guidelines have not been followed.
There have been many studies completed by various different
provinces and states across Canada and the United States. In
almost all instances, the commissions that were asked to review
the property assessment procedure made recommendations back to
the various governments of the day that market or current value
was the most appropriate method to determine property taxation.
There have been studies dealing with:
- Flat tax
- Site tax
- Reproduction Cost
- Replacement Cost
- Income tax
- Fee for service
The major problem with all of these different approaches was that
they did not address the two fundamental principles upon which
the rationale for taxation of real property rests: The principal
of benefits received and the principle of ability to pay.
A property tax consultant can be of many uses to the average
property owner who runs a business or has a large residential
estate. Some of the services a property tax consultant can
provide are as follows:
- They can give advice on filling out information requests
from the Municipal Property Assessment Corporation. Many owners
make serious mistakes by providing information to the
assessment department that is not necessary in the preparation
of your property assessment.
- Many property owners volunteer information verbally and
this information is used against the property owner during
times of appeal.
- All requests and property inspections by the assessor
should go through the property tax consultant rather than the
owner. This is for the property owner's protection. The
consultant will supply to the assessor information after
discussion with the property owner.
- Consultants can give advice to the property owner on any
plans for expansion in order to ensure this expansion is
planned to minimize property taxation and at the same time
maximize productivity and efficiency.
- They can review the assessed value to ensure the accuracy
of the assessed value and that the property owner is being
treated fairly on all structures as well as land use.
- Many times property owners have good intentions but will
miss very important deadlines that could cost them higher
taxes. The consultant can advise on meeting these deadlines.
- They can represent the property owner in negotiations with
the assessor to have the assessed value reduced prior to a
more expensive Assessment Review Board hearing.
- The consultant can save you money in property taxes.
- There are many different rates for consulting services in
the market place and the going rates generally range from
$50.00 - $150.00 per hour.
- If a consultant is going to do a complete job, it should
take approximately three days to a week depending on the size
of the property and how it is assessed. This would also depend
on the type of issues that the consultant had to deal with and
how much research was required. There could be additional costs
for court time and preparation.
The short answer is no one can guarantee that you will get your
taxes reduced. However, when you consider hiring a consultant,
there are a few questions you should ask yourself:
- Does the market/current value of my property assessment seem
high in comparison to what I could sell it for at current
property values?
- Are my property taxes for my type of property higher than
other businesses in my area?
- Do the property taxes in my area seem excessive in
comparison to other similar areas?
- Would I like to know that the assessor has done a proper
job assessing my property?
- Would I pay someone to save me tax dollars with the possibility
that the consultant's fee may be much less than the actual tax savings
If you answer YES any of these questions then you should
consider talking to a consultant. PHONE 1-519-351-5405 - Property Tax Ontario Inc.
