R. J. L. v. City of Toronto, 2015 CanLII 87923

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

December 29, 2015

FILE NO.:

WR 135836

Assessed Person(s):

R. J. L.

Appellant(s):

R. J. L.

Respondent(s):

City of Toronto

Property Location(s):

Withheld

Municipality(ies):

City of Toronto

Roll Number(s):

Withheld

Appeal Number(s):

3107629

Taxation Year(s):

2014

Hearing Event No.

598834

Legislative Authority:

Section 323.(1) (e) of the City of Toronto Act 2006

Heard:

September 29, 2015 in Toronto, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

R. J. L.

Self-represented

City of Toronto

G. Tanner, L. Verastegui and C. Motton

DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI

ISSUE

1The issue before the Assessment Review Board (“Board”) is to determine whether R.J.L.’s, (the “Applicant”) property taxes for the taxation year 2014 should be cancelled, reduced or refunded as a result of the Applicant’s inability to pay due to sickness or extreme poverty under s. 323.(1)(e) of the City of Toronto Act (“Act”).

DECISION

2The Board finds that the Applicant does not qualify for relief under s. 323.(1) (e) of the Act due to an inability to pay part or all of his taxes due to sickness or extreme poverty.

3The Board therefore dismisses the application for cancellation, reduction or refund of taxes for the taxation year 2014.

REASONS FOR DECISION

Legislation

4Section 323.(1)(e) of the Act provides:

“Upon application to the city treasurer made in accordance with this section, the City 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,

(e) the applicant is unable to pay taxes because of sickness or extreme poverty;”

5Section 323.(2) provides:

“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).

6Section 323.(7) provides:

“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.”

7The Act outlines a two part test. In order for the Applicant to qualify for relief under this section of the Act, the Board must first determine whether sickness or extreme poverty exists. If neither sickness nor extreme poverty exits this application fails. If either is present, the Applicant must demonstrate an inability to pay all or part of his taxes.

EVIDENCE AND ANALYSIS

Sickness

8The Applicant did not claim or present the Board with any evidence regarding sickness. The Board must then consider if the Applicant is unable to pay all or part of his taxes due to extreme poverty.

Extreme Poverty

9The term “extreme poverty” is not defined under the Act. In determining whether the Applicant is in a situation of extreme poverty, the Board has to consider the evidence presented by the Applicant regarding his financial situation, which is not limited to his income and expenses.

Applicant’s Submissions

10The Applicant is a 43 year old business owner, who lives with his wife and child (who was born on August 21, 2015) in the subject property. He has been unable to earn a reasonable amount of income from his business and as a result of this, he has accumulated significant amount of personal debt and is consequently seeking cancellation, reduction or refund of his taxes for 2014 taxation year. In support of his Application, he provided Exhibit 1 which includes: Form 1-Financial Information, supporting documents such as household bills, invoices, personal account statements, mortgage statements and 2014 Notices of Assessments for him and his wife.

Source of Income

11The Applicant submits that his source of income for 2014 was from a single large amount of payment he received in 2014 tax year. His wife worked from January to March 2014 and later traveled to South Korea to help her family. He testifies that her father was involved in a car accident and sustained a head injury, while her mother was winding up a business. Under cross examination, the Applicant advised that his wife has other relatives in South Korea and that his wife’s father moved to her uncle’s house in late August 2014, when his wife was still in South Korea. The notice of assessment for the Applicant shows a total income of $7,113. The Applicant also received a tax rebate in 2014 in the amount of $2,045.83, which was added to his income. His wife’s income in 2014 was $4,915. She also received a tax rebate in 2014 in this amount of $313.17, which was added to her 2014 total income.

Asset

12The Applicant owns a single family semi-detached house in Toronto. The property was purchased in 2005 for $348,000. The existing mortgage against this property in 2014 was $373,357.57. The Applicant submits that the assessed value of the property by MPAC is $579,000. The City opposed this, arguing that the market value of the property is $700,000, based on the sales of two similar properties within the vicinity with smaller lot sizes than the subject property, which sold in August and July 2015 for $720,000 and $730,000 respectively. The City also presented the Applicant’s initial Form 1 application, where he states the value of the house as $700,000, but later changed it to $539,000, which is the phase- in value of the property for 2015 as determined by MPAC.

13The Applicant testified that the potential financing available to him based on the phase-in amount, the destination value or the market value is not available and is inaccessible to him due to his low monthly income. He also argued that if it was available to him, it would be based on MPAC’s destination value and not the market value and the interest rate will be extremely high. The Board notes that the Applicant presented no evidence in this regard. He further reiterated that he is already at a maximum debt load and is unable to refinance. The Applicant advised that in 2013, he refinanced his home and paid off personal debt with about $12,000. The Applicant also testified that in order to obtain a mortgage from his bank, his bank will assess his application based on MPAC’s assessed value of his property and not the market value. The Applicant admitted under cross examination that he is not an expert in mortgages; however based on his experience, the bank will use MPAC’s assessed value. He further admitted that the bank will obtain their own assessment which he believes is from MPAC, but he is not sure about this. The Applicant also did not provide the Board with any evidence in this regard.

14There is currently no outstanding property tax for 2014 taxation year. The total property tax paid by the Applicant in 2014 was $4,244.19.

Business Assets, Value and Liabilities

15The Applicant’s business is incorporated. He has 100% ownership of this business. The business has a registered address, which is just a mailbox. The Applicant chose to operate the business from his home. The Applicant testified that this business has potential to make better income and can help to employ people, which will be a significant asset to the City of Toronto. He further urged the Board to give him a onetime, temporary forgiveness from paying his property tax. The Applicant submitted under cross examination that he has never had the business valued. At this hearing, the Applicant did not provide any statement of income and expenses of this business.

Household Income and Expenses

16The Applicant gave evidence that his household income and expenses for 2014 taxation year is as summarized in Table 1 below:

Table 1

Applicant ($)

Spouse ($)

Income (monthly)

762.42

435.00

Expenses (monthly)

Mortgage

1695.56

Property Tax

300.71

Home Insurance

104.76

Water

71.02

Heat

130.00

Hydro

90.00

Groceries

400.00

Household supplies

50.00

Transit /TTC

50.00

Credit Card

122.00

Line of Credit

40.00

Cell Phone

30.00

Meals - Outside

50.00

Vacation

100.00

Total Expenses

3,104.05

130.00

Net

-2,341.63

305.00

Household Net

-2,036.63

Asset

Home

579,000 (Destination Value from MPAC) 700,000 (Market Value by City)

Chequing Account

109.00

Savings Account

17.88

Total Asset

579,126.88 (Destination Value) 700,126.88 (Market Value)

Liabilities

Credit cards

(RBC)24,600 (CIBC)3,000

Mortgage

373,357.57

Line of credit

9,000

Total Liabilities

409,957.57

Net Asset

169,169.31 (using destination value) 290,169.31 (using market value)

17Using the destination value of $579,000 from MPAC the net worth of the Applicant is $169,169.31, while using the market value from the City, the Applicant’s net worth is $290,169.31.

18The Applicant stated that his major expenses are his mortgage, property taxes and other necessities of life. His wife’s trip to South Korea was in response to a dire family obligation and it necessitated her absence and should not be considered frivolous.

19The Applicant concluded his submission by urging the Board for a cancellation, refund or reduction of all or part of the property tax he paid in 2014.

City’s Submission

20Ms. G. Tanner, on behalf of the City of Toronto, submits that this application does not qualify as a case of extreme poverty, which is one of the legislative requirement to qualify for relief from paying property taxes and should be dismissed for the following reasons:

a. The Applicant’s wife took a nine months vacation to South Korea. She was working prior to this vacation and took time off work, which is not consistent in order to have the basic necessities of life and that a plane ticket is not consistent with a “dire” need;

b. There is substantial equity in the home using the market value of $700,000. She further submits that the market value of the Applicant’s property should be used by the Board because in the Applicant’s own admission in his initial Form 1 application, he used the market value. Furthermore, using two highly relevant sales within 250 meters of the Applicant’s property within months of the tax year, with smaller lots sizes than the subject property, it is reasonable and appropriate to use the market value. She further submits that the City took a value lesser than the sale of the two properties. Mr. L. Verastegui, a Revenue Analyst with the City, who has also been an associate of the Institute of Municipal Assessors for seven years, testified that the two sales identified in Tab 5, Exhibit 2 of the City’s Book of Documents is relevant to establish the market value of the Applicant’s property. He stated that they are within the same neighbourhood and within 250 meters from the subject property;

c. The Applicant has a duty to mitigate. In 2014, the Applicant was a single occupant of a three bedroom home, and that he could rent out portions of the home even though it is not for the City to state this. Furthermore, that the Applicant and his wife are both adults of working age.

21Ms. Tanner further opined that there are several incentives available to small business owners by the government, in order to help small business owners get on their feet. The Applicant could also take advantage of this option.

22In Ms. Tanner’s submissions, she referred the Board to a prior decision of the Board. In E.D. v. The City of Toronto, Member Sharma, in her decision equated a situation of extreme poverty as one of a “dire need”. Ms. Tanner argues that the Applicant’s case is not one of a dire need and therefore is not a case of extreme poverty and fails part one of the two part test.

Board’s Analysis

23The intent of the legislation is to provide relief for property owners who cannot pay their property taxes in full or in part due to sickness or extreme poverty in a given taxation year. Either of these two eligible criteria must exist in order for a property owner to fulfill the first part of the test. In E.D. v. The City of Toronto, the Applicant’s application for relief from paying all or part of his property tax was assessed based on the situation of extreme poverty. In this case, Member Sharma indicates that the situation of extreme poverty is a much higher threshold than living in a state of poverty. In other words the Applicant should be in a state of a “dire need”. Furthermore, Member Sharma states:

In viewing an application under this section of the Act, the Board does not only look at the income and expenses of the Applicant but also looks at the full spectrum of the Applicant’s financial resources available and determine whether there was any opportunity that would allow him to mitigate his tax obligation.

24In this Application, the Applicant’s wife went on vacation to South Korea for an extended period of nine months, despite the fact that they were in financial need and she could have continued working in order to pay the property taxes. In months that she worked in 2014, she earned an annual income of $4,915, including a tax rebate of $313.17 for a total annual income of $5,228.17. Had she continued working the combined household income could have paid the monthly property tax of $300.71. There was no evidence from the Applicant indicating that either him or his wife were unable to work as a result of a sickness. The Applicant testified that the vacation costs were about $1,200 and it was a necessary trip and not frivolous. The Applicant and his wife both have an obligation to pay the property tax as occupants of the home. Although the Board sympathizes with the Applicant’s wife about her family issues in South Korea, the Board must keep in mind that a choice to travel for an extended period is not synonymous with extreme poverty. The Applicant and his wife have an obligation to pay their property tax. The Applicant also did not explore secondary means of obtaining income, especially when he presented no evidence of an inability or incapacity to do so.

25The Applicant did not provide any financial information about the business income and expenses and there was no valuation of the business. The Applicant himself testified that his business has the potential to make more income. Any increase in income in subsequent years, and payment to the Applicant who has 100% ownership of the business, can be used to pay his property tax obligation, which is a priority. Without evidence showing the business income and expenses, the Board is unable to determine the financial status of the business, since this was the major source of income for the Applicant in 2014.

26Regarding the value of the assessment of the Applicant’s property, using either the destination value of $579,000 by MPAC or the market value of $700,000 by the City, the Applicant sill has a net worth in the range of $169,000 - $290,000. The Board is unable to make a determination on the market value as there was no sufficient evidence presented by the City. Moreover, this Application is not the correct forum for the Applicant to dispute the assessment of his property. Notwithstanding, there are other compelling reasons as stated above which indicates that the Applicant was not in extreme poverty.

27All home owners have a primary responsibility to pay their property taxes. In this case, in addition to the reasons stated above, the Applicant and his wife are adults of working age, both occupants of the home have as their primary responsibility, the payment of their property tax.

28The Board finds that it would have been reasonably possible for the Applicant to pay all or part of his property taxes.

CONCLUSION

29The Board finds that the Applicant did not establish the requirements for the Board to make a finding of extreme poverty in order to qualify for relief under the Act from paying all or part his property taxes.

30The Board therefore dismisses the Application for the cancellation, reduction or refund of taxes for the taxation year 2014.