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is to maintain a current level of value on your property so that the equality of the assessment values do not become outdated as they did in the past.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.
- The current legislation allows for reassessments every fours years using the appraisal dates starting with January 1, 2008 for tax years 2009 to 2012. The January 1, 2012 for tax years 2013 to 2016.
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 areas 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.
