1015583 Ontario Limited v. The City of Brockville, 2008 CanLII 91517

Assessment Review Board

Commission de révision de l’évaluation foncière

File No: WR 72363

Region Number: 2

Municipality: City of Brockville

Roll Number: 0802-010-025-05200-0000

Hearing Number: 144789

Appeal Number: 1896711

In the matter of Section 357.(7) of the Municipal Act, S.O. 2001, c. 25, as amended, and in the matter of an appeal with respect to taxation year 2005 on premises known municipally as 16 Reynolds Drive.

BETWEEN: Public Works Canada

1015583 Ontario Limited Assessed Person/

Appellant

• and -

The City of Brockville

Respondent

APPEARING: J. MacIntosh - Counsel for the Appellant, 1015583

Ontario Limited

J. Fullarton - for the Appellant, 1015583 Ontario

Limited

D. Smith - for the Municipality

M. McDonald

No one appeared - for the Assessed Person, Public Works

Canada

DECISION OF THE ASSESSMENT REVIEW BOARD delivered by:

R. Tchegus

This appeal came before the Assessment Review Board on October 22, 2008 in the City of Brockville.

ISSUE

This is an appeal pursuant to subsection 357.(7) of the Municipal Act, 2001 (Act) from a decision of the Council of the City of Brockville (City) made on December 19, 2006 pursuant to said section 357 to increase the 2005 property taxes for the subject property by the sum of $4,108.53.

DECISION

The Board finds that the City did not have the authority to increase taxes under section 357 for the 2005 taxation year. The Board orders a refund in realty taxes and interest in the amount of $2,928.43 previously paid for this property with respect to the 2005 taxation year.

REASONS FOR DECISION

The Appellant’s Position

The appellant, 1015583 Ontario Limited, purchased the property on June 30, 2005, for $161,000.00 from Her Majesty the Queen in Right of Canada. The property was previously occupied as a detachment office for the Royal Canadian Mounted Police with some related residential usage.

It appears that the sole intent of the appellant was to “flip” the property for sale. Mr. MacIntosh submitted that the appellant was into sales negotiations during most of its period of ownership. After extensive negotiations, neither the first nor the second proposed sales proceeded, but the third proposed sale was successful. The appellant sold the property on April 30, 2007 to the Brockville and District Shrine Association.

From June 30, 2005 until April 30, 2007, the appellant submits that the property was vacant. No commercial activity took place as a commercial use was never intended, or, according to the appellant, even possible. The appellant submitted that the property was zoned “institutional” when purchased. The building is, by appearance, a residence. The appellant did not change the substance of the property or make any material changes. It did not rezone the property. It did not use the property in any way. The property was vacant during the appellant’s entire 22-month period of ownership.

In the fall of 2005, the appellant received an Amended Notice of Assessment from the Municipal Property Assessment Corporation (MPAC) for the 2006 taxation year, assessing the property to have a current value of $165,000 as of the January 1, 2005 valuation day, and being in the fully taxable commercial property class.

In December of the following year, the appellant received “Notice of Decision – Application for Cancellation, Reduction or Refund of Taxes – The Municipal Act, 2001, S.O. 2001, sections 357, 358 and 359” from the City of Brockville, giving Notice of a Decision made by its Municipal Council on December 19, 2006 increasing the taxes on the property for the effective date July 1 to December 31, 2005. The adjusted amount of realty taxes was a $4,108.52 “increase due to classification change” and the Notice advised, “please remit payment by December 31, 2006”. The appellant has appealed under subsection 357.(7) of the Act.

In the Statement of Issues previously filed with the Board by Mr. John Fullarton, Vice-President of the appellant’s company, the appellant states:

In 2006, pursuant to section 357 of the Municipal Act, the City of Brockville in application number 2005-12 adjusted the realty taxes for the property to the amount of $4,108.52. The Notice of Decision does not indicate whether this is an increase, a decrease or the establishment of taxes for the year 2006. This Notice of decision was appealed by the Company on January 23, 2007.

The property was sold by the Company on April 30, 2007, and at that time the realty taxes for the taxation year 2006 were $7,915.74, and in order to complete the transaction, and without acknowledging the accuracy of the taxes, they were paid by the Company at the time of completion of the sale.

When the sale was completed, the property, by application of the purchasers, was re-zoned to R-1 Special (fraternity) to provide for a planned residential apartment in keeping with the general area property usage, and planned fraternal hall for the Brockville & District Shrine Club.

The Property Assessment Notice for the 2006 tax year designated the property classification as “commercial taxable: full”. Throughout the period of ownership by the Company, the property had never been used for commercial activity, and until such time as the zoning was changed, it was not capable of being used for a commercial activity. (The exterior appearance of the building located on the property is that of a single-family residence.)

The current taxes levied against the property for the first instalment of 2008 are $1,305.57 or an approximate levy for the year 2008 of $2,611.14.

Throughout the period of the Company’s ownership, no exterior additions or improvements were made to the dwelling located on the property.

The appellant submitted that based upon the actual use of the property by it, the fully taxable commercial property tax class is simply inequitable. It did not object to the current value but only the property classification.

Previous Board Orders

The City is in default of two previous Board Orders, and because of the repeated default, the Board ordered that:

…the municipality is denied the opportunity to submit evidence at the hearing without the consent of the appellant and leave of the Presiding Board Member(s).

This sanction respecting evidence shall not relieve the municipality of the obligation to comply with the disclosure process (productions/necessary examinations for discovery) as ordered herein. Nor does it deny the opportunity to cross-examine the appellant and any appellant’s witness, or the right to provide closing submissions, inclusive of authorities.

At this hearing, the City of Brockville was represented by Ms. D. Smith and Mr. M. McDonald. Ms. Smith was prepared to present the Municipality’s position, explaining that she had not received the Notices of the first two pre-hearings until the dates had passed. The Notices were delivered to the City Clerk, who failed to pass on the documents in a timely fashion. Ms. Smith requested leave to present evidence.

After a brief discussion between the appellant and counsel, the appellant consented to Ms. Smith presenting evidence for the City beyond the extent contemplated in the Board Order; hence, the Board gave leave.

The Municipality’s Position

Ms. Smith is a Revenue Accountant/Tax Collector with the City of Brockville and has been employed with the City for 28 years. She submitted a number of bundled documents as Exhibit #1, having a cover letter from her to Mr. MacIntosh under date of July 23, 2008. That letter commences:

The City of Brockville is in receipt of your letter dated July 9, 2008 and the letter of your client outlining his reason for the appeal of the application as authorized under section 357 of the Municipal Act.

This application, 2005-12 was initiated by me on or about August 30, 2005. The reason for the application was a change in the property class from payment in lieu to taxable as based on the letter dated July 11, 2005 from Public Works and Government Services Canada. This letter advised that the property had been sold effective June 29, 2005. The application was forwarded to the Municipal Property Assessment Corporation (MPAC) for approval.

You will note from the documentation provided from the Assessment Act, the Municipal Act and MPAC’s website that it is the purpose of MPAC to provide the property class and assessed value to the Municipality. The Municipality then applies the appropriate tax rates in order to calculate the taxes to be levied.

The application was returned from MPAC. The realty tax class (RTC) was not changed it remained as C (commercial) and the realty tax qualifier (RTQ) was changed from F (payment in lieu) to T (taxable full). The application was processed and approved as recommended by MPAC by Brockville City Council at their meeting on December 19, 2006. Notice of Hearing and Notice of Decision was mailed to the property owner advising that the property class change effective July 1 to December 31, 2005 resulted in a tax levy for that period of $4,108.52.

Taxes for 2006 were calculated based upon the assessed value provided by MPAC in the assessment rolls. The assessed value was CT (commercial taxable full) $165,000. Taxes were due March 1, 2006 in the amount of $4,099.88 and September 29, 2006 in the amount of $3,815.86, a total of $7,915.74.

As the property remained vacant, the property owner was qualified to and did apply for a Property Tax Rebate for Vacant Commercial and Industrial buildings as authorized by Section 364 of the Municipal Act and Brockville City by-law for both 2005 and 2006. Mr. Fullarton applied on December 28, 2006 for both properties. The applications were forwarded to MPAC for assessment value and approval. These applications were processed by the City of Brockville January 18, 2007. A rebate resulted for July 1 to December 31, 2005 in the amount of $1,232.56 and for January 1 to December 31, 2006 in the amount of $2,374.72. As taxes were outstanding, these amounts were applied to the tax arrears to reduce the outstanding balance.

Taxes for 2007 were calculated based on the assessed value provided by MPAC in the assessment rolls. The assessed value was CT (commercial taxable full) $165,000. Taxes were due March 1, 2006 in the amount of $3,957.87 (interim tax bills are based not on assessed value but on 50% of the previous years annualized taxes of $7,915.74/2) and September 28, 2007 of $4,060.21, a total of $8,018.08.

On September 13, 2007 the new property owner, Brockville and District Shrine Association applied for a reduction due to property classification change effective May 1, 2007 to December 31, 2007 as authorized under section 357 of the Municipal Act. This application was forwarded to MPAC. The value was changed from CT (commercial taxable full) to RT (residential taxable full). The application was returned and processed by Brockville City Council as recommended on December 18, 2007. This resulted in a reduction of $3,730.81.

Taxes for 2008 will be calculated based on the assessed value as provided by MPAC in the assessment rolls. The assessed value is RT $165,000. Annualized taxes are projected to be $2,680.18.

Ms. Smith also provided the following summary of the tax treatment (excluding interest and/or penalties) for the taxation years 2005 to 2008, inclusive:

Date Description Total

July 1 to Dec. 31, 2005 taxes levied by section 357 $4,108.52

July 1 to Dec. 31, 2005 vacancy rebate $1,232.56

$2,875.96

March 1 2006 2006 interim taxes $4,099.88

September 29, 2006 2006 Final taxes $3,815.86

January 18, 2007 2006 Vacancy rebate $2,374.72

$5,541.02

March 1 2007 2007 interim taxes $3,957.87

September 28, 2007 2007 Final taxes $4,060.81

May 1 to Dec. 31, 2007 reduction section 357 $3,730.81

$4,287.27

March 3 2008 2008 interim taxes $1,305.57

August 29, 2008 2008 Final taxes (approximate) $1,374.61

$2,680.18

The Legislation

Subsection 357.(7) of the Act provides:

357.(7) Appeal. – Within 35 days after council makes its decision, an applicant may appeal the decision of council to the Assessment Review Board by filing a notice of appeal with the registrar of the board.

Reference must be given to the previous subsections:

357.(1) Cancellation, reduction, refund of taxes. – Upon application to the treasurer of a local municipality made in accordance with this section, the local municipality may cancel, reduce or refund all or part of taxes levied on land in the year in respect of which the application is made if,

(a) as a result of a change event, as defined in clause (a) of the definition of "change event" in subsection 34 (2.2) of the Assessment Act, during the taxation year, the property or portion of the property is eligible to be reclassified in a different class of real property, as defined in regulations made under that Act, and that class has a lower tax ratio for the taxation year than the class the property or portion of the property is in before the change event, and no supplementary assessment is made in respect of the change event under subsection 34 (2) of the Assessment Act;

(b) the land has become vacant land or excess land during the year or during the preceding year after the return of the assessment roll for the preceding year;

(c) the land has become exempt from taxation during the year or during the preceding year after the return of the assessment roll for the preceding year;

(d) during the year or during the preceding year after the return of the assessment roll, a building on the land,

(i) was razed by fire, demolition or otherwise, or

(ii) was damaged by fire, demolition or otherwise so as to render it substantially unusable for the purposes for which it was used immediately prior to the damage;

(d.1) the applicant is unable to pay taxes because of sickness or extreme poverty;

(e) a mobile unit on the land was removed during the year or during the preceding year after the return of the assessment roll for the preceding year;

(f) a person was overcharged due to a gross or manifest error that is clerical or factual in nature, including the transposition of figures, a typographical error or similar error but not an error in judgment in assessing the property; or

(g) repairs or renovations to the land prevented the normal use of the land for a period of at least three months during the year. [Emphasis added]

357.(1.1) Exception, vacant unit rebate. – For 2007 and subsequent taxation years, no cancellation, reduction or refund of taxes is permitted under clause (1) (g) in respect of land that is eligible property under section 364.

357.(2) Application. – An application may only be made by the owner of the land or by another person who,

(a) has an interest in the land as shown on the records of the appropriate land registry office and the sheriff's office;

(b) is a tenant, occupant or other person in possession of the land; or

(c) is the spouse of the owner or other person described in clause (a) or (b). [Emphasis added]

357.(3) Timing. – An application under this section must be filed with the treasurer on or before February 28 of the year following the year in respect of which the application is made. [Emphasis added]

357.(4) Application by treasurer. – Despite subsections (2) and (3), an application under clause (1) (f) or (g) may be made by the treasurer of the local municipality on or before April 30 of the year following the year in respect of which the application is made if no application is made by a person described in subsection (2) within the deadline set out in subsection (3). [Emphasis added]

357.(5) Meeting. – On or before September 30 of the year following the year in respect of which the application is made, council shall,

(a) hold a meeting at which the applicants may make representations to council;

(b) notify the applicants of the meeting by mail sent at least 14 days before the meeting; and

(c) make its decision. [Emphasis added]

357.(6) Notice. – Within 14 days after making its decision, council shall notify the applicants of the decision and specify the last day for appealing the decision.

Analysis

The Board finds that Ms. Smith did not have the authority to commence the section 357 application for the 2005 taxation year. She correctly advised MPAC as to the change in property class from Commercial (Payment-in-lieu) to Commercial (Fully Taxable), but it was the responsibility of MPAC to issue a Supplementary Notice of Assessment for taxation year 2005 pursuant to section 34 of the Assessment Act, R.S.O. 1990, c. A.31, as amended. There is no evidence that MPAC issued any supplementary assessment. It appears that MPAC waited for the Amended Notice of Assessment, which was necessary regardless because of the change in the valuation day for the 2006 taxation year, before making the formal amendment to the assessment roll.

Subsection 357.(2) makes it clear that only the owner, a person having a registered interest in land or a execution creditor, spouses of the foregoing and a tenant or occupier may apply pursuant for tax relief. For the 2005 taxation year, the application, pursuant to subsection 357.(3), was to have been filed by February 28, 2006. If the application was based upon an overcharge or renovations, the treasurer could make an application up to April 30, 2006. Ms. Smith does not fall into any of the categories set out in subsections 357.(2) and (3).

On a section 357 application, Council must render a decision prior to September 30 of the year following the relevant taxation year. In this instance, Brockville Council made the decision on December 19, 2006 – well over two-and-one-half months past the deadline.

Even under section 357 the process would have been defective for failure of notice. Subsection 357.(5)(b) requires 14 days notice and subsection (a) permits the applicants to make representations to Council, neither of which appears, from the evidence, to have occurred. The only evidence of notice was a “Notice of Hearing and Notice of Decision” mailed after Council’s decision, thus denying notice in advance and any right to be heard prior to a decision being made.

Had the appellant received the Amended Notice of Assessment for the 2005 taxation year, it could have filed a complaint with the Board pursuant to subsection 40(1)(a)(iv) of the Assessment Act, which permitted a complaint on the basis of incorrect classification until March 31, 2006.

In both her written submissions and her oral testimony, Ms. Smith only referred to section 357 of the Municipal Act, 2001 (as well as section 364). The $4,108.52 being the subject of Council’s December 19, 2006 decision and therefore being the subject of this appeal is described by her as “taxes levied by section 357”.

The Municipality did not rely upon section 359 of the Municipal Act, subsection (1) of which provides:

359.(1) Increase of taxes. – Upon application made by the treasurer of the local municipality, a local municipality may increase the taxes levied on land in the year in respect of which the application is made to the extent of any undercharge caused by a gross or manifest error that is a clerical or factual error, including the transposition of figures, a typographical error or similar error, but not an error in judgement in assessing the land.

Had this been an appeal to the Board pursuant to subsection 359.(5) of the Municipal Act, 2001, the Board would have had jurisdiction to consider whether the failure by the City to impose taxes until December 19, 2006, amounted to “a gross or manifest error that is a clerical or factual error” as opposed to “an error in judgment in assessing the land”. An application could have been made by the treasurer until December 31, 2006. That did not occur. Subsection 359.(3) also requires notice at least 14 days before the meeting.

The City of Brockville had no jurisdiction to increase the 2005 real property taxes for the subject property by $4,108.52 in the way that it did. It did allow for a $1,232.58 vacancy rebate, decreasing the 2005 realty taxes paid by the applicant to a total of $2,875.96.

With respect to the outstanding taxes, the Tax Certificate for the property, obtained by the appellant on March 22, 2007, indicates that the 2006 realty taxes levied were $7,915.74, the outstanding taxes were $8,416.98, with interest of $881.05 for a total owing of $9,298.03. In accordance with Ms. Smith’s testimony, the 2005 and 2006 realty taxes charged ($4,108.52 + $7,915.74 = $12,024.26) less the vacancy rebates granted ($1,232.56 + $2,374.72 = $3,607.28) equals $8,416.98.

The Certificate also indicates that $881.05 of interest was also paid by the appellant. However, that amount is based upon there being 2005 realty taxes owing. While it will not reimburse the appellant fully, the 2006 realty taxes of $7,915.74 as a percentage of the taxes noted outstanding in the Certificate of $8,416.98 amounts to 94.0448949%. That percentage of the interest or penalty is $828.58.

The Board, therefore, orders that the City of Brockville refund to the appellant the amount of $2,875.96 in realty taxes paid for the 2005 taxation year and $52.47 interest thereon for a total of $2,928.43.

“R. Tchegus”

R. Tchegus

Member

/ci

DECISION RELEASED ON: December 5, 2008