Ontario Assessment Update: Without Ministerial Action, Next Year is A General Reassessment
August 8, 2023
The status of the assessment legislation in Ontario requires a General Reassessment in 2024 based on a January 1, 2022 valuation date. There is speculation that it could change, but it hasn’t happened yet.
Even though much has changed since 2016, Ontario’s property assessments are still based on a January 1, 2016, valuation date. While this provided much-needed stability during the Covid years, the inequity created by out-of-date values necessitates an update. The state of the legislative scheme currently requires a province-wide general reassessment in 2024. There are murmurs that the Minister of Finance may delay 2024 as he did in 2022 and 2023. Commercial real estate organizations have recently written to Premier Ford and Minister Bethlenfalvy, asking them to ensure that a reassessment occurs, which will ensure that all taxpayers are paying their fair share.
The Legislative Scheme
The Assessment Act (“Act”) provides a valuation day on which all properties in the province are to be valued. Ontario had general reassessments every four years in 2008 and 2012. The 2016 general reassessment was also supposed to be a four-year cycle until the Covid pandemic required intervention.
The Act states:
Valuation days
19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:
5. After 2020, for each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year that precedes the period by two years. …
Exception
(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the Minister prescribes a different day for which land is valued for that year.
Regulation 282/98, the general regulation for the Act, has been amended to include 2021-2022 and 2023 to the 2016 cycle:
Different Valuation Days for the purposes of Section 19.2 of the Act
48.6 For the purposes of section 19.2 of the Act, January 1, 2016, is prescribed as the day on which land is valued for the 2021, 2022, and 2023 taxation years. O. Reg. 186/20, s. 1; O. Reg. 320/21, s. 3; O. Reg. 13/22, s. 3.
The Covid Changes
As a result of the Covid-19 pandemic, the 2021 general reassessment was postponed leaving the 2016 values to carry over for 2021. With Ontario’s growth, buildings that didn’t exist in 2016 are required to be valued as if they did exist in 2016, which can cause challenges in valuing such properties, especially when subsection 44(3) of the Act requires that values must be equitable amongst similar lands in the vicinity.
In April of 2021, the pandemic continued, and through Ontario Regulation 320/21, the Minister used his power to extend the cycle to base 2022 values on the same January 1, 2016 valuation date.
Even though the world had primarily resumed regular business by January of 2022, Minister Bethlenfalvy made Ontario Regulation 13/22 on January 7, 2022, linking the 2023 taxation year with the 2016 valuation date.
There was wide speculation in the industry that this policy would continue into 2024. However, no regulation has been made to date. In the normal course, we would expect to see assessment notices sent as early as November with an appeal deadline of March 31. MPAC must return the assessment roll to each municipality by the second Tuesday in December each year, regardless of the valuation date, as each year requires a new roll regardless of the valuation date. As of August 5, 2023, there has been no publication of a regulation changing the general reassessment that is pending in 2024. This means a general reassessment can be expected for 2024 unless there is ministerial intervention.
The Importance of Current Value
The way the assessment system works in Ontario, if property values are out of sync with the markets, then one property or group of properties can pay more than their fair share. As long as every property is assessed appropriately, taxes are shared in accordance with value. If, for example, hotel properties in a municipality have grown in value by 5% while warehouses and distribution centers have grown at a rate of 25%, then hotel properties in that municipality are going to have an unfair tax burden. If everyone’s value rose at the same rate, taxes would only increase if the municipality passed a budget increase with corresponding tax hikes. The legislative scheme requires a regular update which is why the current system, which was first implemented in 1998, required a regular general reassessment.
Stability is found in current values rather than frozen values. With Ontario’s growth and economic development, the priority should be to ensure that taxes are distributed fairly and in accordance with the legislative scheme. This is especially so when the Assessment Review Board has recently held that, effectively, the legislative scheme does not allow for more than one challenge to an assessment for the valuation date.
Let the Legislation Play Out
The Municipal Property Assessment Corporation (“MPAC”), tasked with performing all assessments in Ontario, recently stated in its Annual Report that it is prepared to do a general reassessment at any time. Given the current state of the legislation and regulations, one would hope they are prepared for a general reassessment in 2024 with a January 1, 2022 valuation date. If the Minister is going to change the 2024 general reassessment, it ought to have been done in January or at least in the first quarter. It may well be time for the Ford Government to let the legislative scheme play out, taking MPAC at their word that they are ready. For businesses and Ontario’s competitiveness, it is time for updated values.
Challenges
A 2024 general reassessment is challenging, especially at this point in the year. MPAC may be waiting for a “go or no go” statement from the Minister despite the clear language in the Act.
The three previous changes extending the general reassessment were made early in the prior year; to date, no such statement has been made regarding 2024. As a result, a 2024 reassessment allows little time for any pre-roll negotiation with interest groups and complex properties. It gives little time for MPAC to test run and ensure timely delivery of the rolls and notices.
2024 without a Reassessment
If 2024 is added to the 2016 cycle, many things still need to be reviewed. Litigation continues on whether the annual assessment roll ensures a taxpayer’s right to an annual appeal. Historic frozen roll caselaw will become even more critical as many properties have become inequitably assessed. Properties that have changed through physical depreciation during the cycle may have a change in state and condition that must be accounted for, albeit with economic circumstances as of the valuation date in 2016.
If the Minister does change the 2024 assessment from January 1, 2022, then next year should be filled with pre-roll consultation and preparation for what should be a general reassessment in 2025. Hopefully, there will be clear direction from the Minister with respect to 2025 if there is a change to 2024.
Call your MPP and be prepared for anything
Now is the time for businesses to call your MPP and tell them to let the legislation play out and, at a minimum, set a clear pathway to a general reassessment. Ontario’s competitiveness and development will benefit from returning to business post-covid, and part of that is having a regular, updated assessment roll.
Regardless of what happens, now is the time to review your property portfolio and explore what can be done next year for a 2016 or 2022 valuation date.
For inquiries, contact ken.west@ryanlawyers.com
Ryan Law