Editor's Note: This article was first published Feb 13 2016.
Thousands of purchasers of new condominiums are being overcharged for property taxes.
Here’s how it works: when a new condominium is ready for occupancy, the buyer gets the keys and can move in — but title will not be transferred for some months.
The period between occupancy and the final closing, when title is transferred, is called the “interim occupancy period.” During this time, buyers pay the builder a monthly interim occupancy fee.
The components of this fee are set out in the Condominium Act, and include an amount “reasonably estimated” by the builder for the unit’s municipal taxes.
Most builders typically calculate the tax component of the interim occupancy fee by taking the purchase price of the unit as shown on the front page of the offer and multiplying it by 1 per cent. The result is then divided by 12 to get the monthly charge.
The 1 per cent figure is supposed to represent the city of Toronto’s mill rate, which is a percentage used to arrive at annual taxes. The city sets the mill rate with its annual budget, and for every residential property in the city, the assessed value is multiplied by the mill rate to yield the annual property taxes.
The way some builders calculate estimated taxes, however, is not the way the city does it. And the result is a significant overcharge to buyers.