What is Toronto’s Vacant Home Tax and What Does it Mean for Owners, Buyers & Sellers?

All owners of residential property in the City of Toronto must file an online declaration of the occupancy status of their property before February 2, 2023.

Editor's Note: This column was original published in Dec 2022.

Toronto’s new annual tax on vacant residences kicks in on January 1, and it will have a significant impact on how real estate transactions take place.

If a residential unit was vacant in the year prior to a sale, or if a seller did not file the city’s required property status declaration, purchasers could be on the hook for penalties of up to $10,000 which will be added to the tax account.

In order to protect themselves, prudent purchasers, their real estate agents and their lawyers should now require sellers to deliver copies of the filed property status declaration as part of the purchase negotiations and closing process.

Here’s how the new law works: All owners of residential property in the City of Toronto must file an online declaration of the occupancy status of their property before February 2, 2023.

Anyone who fails to file a declaration is liable to a fine of between $250 and $10,000. And if the home was in fact empty, there is a tax of one per cent of the current value assessment. That amount will get added to the tax bill for the property and, if it is sold, the new owner could unknowingly get stuck with payment after closing. 

The stated goal of the new tax is to increase the supply of housing by discouraging owners from leaving their residential properties unoccupied. Homeowners who choose to keep their properties vacant are subject to the tax.

A unit is classified as vacant if, for more than six months in the previous taxation year, it was not the principal residence of the owner or another occupant, or if it is not occupied by a residential tenant under a written lease for at least six months of the year.

A property is exempt from the tax if:

  • The unit was vacant for six months or more due to the death of an owner.
  • The property is undergoing repairs or renovations, and the normal use is prevented by the needed work, all necessary permits have been issued, and the chief building official is of the opinion that the work is being carried out without unnecessary delay.
  • The principal resident is in hospital or a long-term care facility for at least six months during the taxation year.
  • The property was purchased in the previous year.
  • The unit needs to be lived in for employment purposes by its owner for at least six months, if the owner lives outside of the Greater Toronto Area.

Unfortunately, there is another class of residential unit which the bylaw has not considered. Units which are zoned residential and are not the principal residence of the owner may legally be used as a home office, a music or artist’s or writer’s studio for the owner, or the owner’s property management office in a large apartment building.

I think the bylaw should be amended to add exemptions for units like these. And, unless the bylaw is amended or clarified, the owners of these type of units could well get hit with an annual tax of one per cent of the property’s value.

Image credit: iStock/Getty Image

Bob Aaron is Toronto real estate lawyer. His column appears on this blog, Move Smartlyand in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website aaron.ca. 

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