Higher Property Assessment Doesn’t Necessarily Mean Higher Taxes

Bob Aaron in Legal

Dollar Sign and House
Ontario property owners may soon be in for a shock when they receive
their new property assessment notice, but it doesn’t necessarily mean
their taxes are going up.

Sometime this fall, all Ontario property owners are scheduled to receive notice of their 2012 assessed values from the Municipal Property Assessment Corp.
(MPAC). In some areas of the province, the average valuations will show
an increase of as much as 29 per cent over 2008, but that does not mean
that property taxes will automatically increase.

This year’s assessment update is the second in Ontario’s new four-year assessment and phase-in cycle.

The typical assessment notice will
show any change in value between the last assessment date of Jan. 1,
2008, and the new date, Jan. 1, 2012. On average, sale prices for
residential properties province-wide have risen 17 per cent between
those two dates, but in Toronto the jump is 23 per cent, in the region
of York the figure is 28 per cent, and the bump in Halton and Peel is 22
per cent. The districts of Cochrane and Timiskaming hold the record
average jump at 29 per cent and Windsor is the lowest with no increase.

Larry Hummel is MPAC’s chief
assessor. In a recent announcement he stated, “Property owners should
remember that an increase in assessment does not necessarily mean an
increase in property taxes. It all depends on a number of factors
including the amount of revenue required by your municipality or taxing
authority to deliver services.”

Municipal taxes are calculated by
multiplying a property’s assessment by the municipal mill rate. In
Toronto, the mill rate for single-family residential homes is .7711981
per cent. Applying this figure to a house assessed in 2008 at $500,000
would result in annual property taxes of $3,855.99.

If the value of that house increases
to $615,000 as a result of the 2012 reassessment, the mill rate would
drop by 23 per cent if the city budget remained neutral. Taxes would
only increase by the percentage approved by city council.

In order to arrive at the 2012
property valuations, MPAC has used reported sale prices of arm’s-length
market transactions between a willing seller and willing buyer. Where a
property has not been sold, the current value is what MPAC believes is
the most probable sale price based on an analysis of all sales
transactions in the local market.

To help provide a measure of tax
stability, the Ontario government has introduced a phase-in program
where market increases in assessed values between 2008 and 2012 will be
phased in over four years, from 2013 to 2016. The full benefit of any
decrease will be applied immediately, in 2013.

Here’s how it works: if all
residential property in a municipality has increased by 16 per cent
since 2008 and the assessed value of one home has increased by 20 per
cent over the same period, then the homeowner may pay four per cent more
than the average property tax being paid in that area. With the
phase-in program, the assessment-related property tax increase in this
example would be phased in at 1 per cent a year over four years.

Inevitably, many homeowners will
object to the new valuation for their homes. They are welcome to contact
MPAC to discuss their assessment and they will be allowed to obtain
information on up to 24 additional properties of their own choice and up
to six selected by MPAC.

If the owner is still dissatisfied,
he or she can file a Request for Reconsideration (RFR) without charge,
prior to March 31 of the tax year, starting in 2013. Owners can also
file an appeal with the Assessment Review Board (ARB), an independent
tribunal of the Ontario government.

At the ARB hearing, the onus is on
MPAC to prove the accuracy of the assessed value and the homeowners will
have an opportunity to provide other evidence disputing MPAC’s

Homes and condominiums built between 2008 and 2012 will be assessed on the purchase prices excluding the harmonized sales tax.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron
in Toronto and a past board member of the Tarion Warranty Corp.  Bob
specializes in the areas of real estate, corporate and
commercial law, estates and wills and landlord/tenant law. His 
Title Page column appears alternate Saturdays in The Toronto Star and alternate weeks on Move Smartly.  E-mail bob@aaron.ca

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