Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 20, 2016 FILE NO.: WR 141694

Assessed Person(s): 645116 Ontario Limited Applicant(s): KS 107 Alfred Kuehne Inc. c/o CBRE Limited Respondent(s): City of Brampton Property Location(s): 107 Alfred Kuehne Boulevard Municipality(ies): City of Brampton Roll Number(s): 2110-150-116-10900-0000 Appeal Number(s): 3104233 Taxation Year(s): 2014 Hearing Event No.: 627879

Legislative Authority: Section 364.(14) of the Municipal Act, S.O. 2001, c. 25, as amended

Heard: July 26, 2016 in Brampton, Ontario

APPEARANCES:

Parties	Counsel+/Representative
645116 Ontario Limited	No one appeared
KS 107 Alfred Kuehne Inc.	Laine Gambeta
City of Brampton	Aida Karreman

MEMORANDUM OF ORAL DECISION DELIVERED BY ANTHONY LaREGINA ON JULY 26, 2016

INTRODUCTION

1This appeal came before the Assessment Review Board on July 26, 2016, in the City of Brampton.

ISSUES

2Mr. Gambeta, representing the appellant, argues that the subject property was leased as of December 13, 2013 to CALYX Transportation Group Inc., but the occupancy date was as of July 1, 2014. Based on the occupancy date Mr. Gambeta is requesting a vacancy rebate for the subject property from January 1, 2014 to June 30, 2014.

3Ms. Karreman, representing the City of Brampton, argues that the property was already leased as of December 13, 2013 and therefore, cannot be further leased to a third party, resulting in the City rejecting the application for a vacancy rebate covering the period of January 1, 2014 to June 30, 2014. Ms. Karreman submits further that there is also evidence supporting the fact that the tenants were allowed to enter and use the building in advance of the occupancy date. Ms. Karreman requests that the Board reject the application for a vacancy rebate.

4The issue before the Board is to determine whether a NIL vacancy rebate for the 2014 taxation year is correct.

DECISION

5The Board finds the vacancy rebate for the 2014 taxation year is NIL.

Description of the Property

6The subject property is located at 107 Alfred Kuehne Boulevard. The subject lot area is 16.29 acres with a frontage of 173.6 feet. The property is improved with a two storey, single tenant industrial building. The building contains a total gross floor space of 192,829 square feet which includes approximately 27,206 square feet of office space on two floors. The building was constructed in 1987 and the official plan designates the building as industrial.

Appellant’s Evidence

7Mr. Gambeta introduced Exhibit 1 into evidence which includes:

1. Application for rebate of property taxes.
2. RealNet Industrial Transaction Summary.
3. CBRE Tennant Status Report.
4. Pages 1, 16 and 18 of the lease document between KS (107 Alfred Kuehne) Inc. and CALYX Transportation Group Inc.

8Mr. Gambeta referred to page 1 of the lease and indicated that it was signed December 13, 2013 and the occupancy date was to begin July 1, 2014.

9Mr. Gambeta also pointed out that the property was sold to KingSett Capital Inc., KS (107 Kuehne) Inc. on January 16, 2014 with the existing lease in place.

Appellant’s Summation

10Mr. Gambeta submits that even though the building was leased as of December 13, 2013 the actual commencement date of the lease, and therefore the occupancy, started from July 1, 2014. Mr. Gambeta requests that based on the fact that the building was vacant from January 1, 2014 to June 30, 2014 the vacancy rebate should be issued for that period.

City of Brampton’s Evidence

11Ms. Karreman began her submission by stating that the three pages of the lease document that Mr. Gambeta submitted do not give an accurate account of the facts and therefore, requested that Mr. Gambeta enter the entire lease into evidence.

12Mr. Gambeta agreed to enter the complete lease document as Exhibit 2.

13Ms. Karreman refers to page 14 and 15 of the lease section 11.02 “Early Access” pointing out that the lease calls for the tenant to have access to the office area commencing February 1, 2014 and the warehouse portion not required by the landlord to complete the landlord’s work commencing May 1, 2014.

14Ms. Karreman also points out that the lease signed in December 2013 was sold with the building and the sales transaction occurred on January 16, 2014. Furthermore, the new owner agreed to take over the existing lease which requires the owner to extensively upgrade the building including the construction of 28 new truck level doors, pave an additional five acres of the excess land and install a perimeter fence.

15Ms. Karreman also points out that upon visiting the site during the disputed vacancy period it was evident that there were no visible signs to lease the building and therefore it appeared that the building was not available for lease. Mr. Gambeta agreed with Ms. Karreman that the building was not officially listed for lease during the vacancy period but CBRE Limited, the management company, had unofficially put the “word out” that there was available space.

City of Brampton’s Summation

16Ms. Karreman submits that the building was under lease as of December 2013 and that the new owner purchased the building with the lease in place. She further submits that the building was undergoing extensive work during the alleged vacancy period and furthermore, the tenant was allowed to enter and have access to the building starting on February 1, 2014. Based on the above evidence the City of Brampton concluded that the property does not qualify for a vacancy rebate and requests that the Board reject the application.

The Legislation

17Section 364. (1) of the Municipal Act, states:

364. (1) Vacant unit rebate. -- Every local municipality shall have a program to provide tax rebates to owners of property that has vacant portions if that property is in any of the commercial classes or industrial classes, as defined in subsection 308(1).

18Section 364.(2) states:

(2) Requirements of program. -- A tax rebate program under this section must meet the following requirements:

1. The program shall apply to eligible property as prescribed by the Minister of Finance for the purposes of this section.

2. If the property is in any of the commercial classes, the rebate shall be equal to 30 per cent of the taxes applicable to the eligible property, as determined under clause (12)(b).

3. If the property is in any of the industrial classes, the rebate shall be equal to 35 per cent of the taxes applicable to the eligible property, as determined under clause (12)(b).

4. An application may be made by or on behalf of the owner.

5. The application shall be made to the local municipality by the last day of February of the year following the taxation year in respect of which the application is made or such later date as the Minister of Finance may prescribe, either before or after the expiry of the time limit.

6. Unless otherwise prescribed by the Minister of Finance, an owner or a person on behalf of the owner shall submit one application for a taxation year, except that an interim application may be made for the first six months of the taxation year.

19Section 364.(14) states:

(14) Complaint -- A person who has made an application under this section may, within 120 days after the municipality mails the determination of the amount of the rebate, complain to the Assessment Review Board in writing that the amount is too low.

20Section 364.(16) states:

(16) Determination by the Board. -- In a complaint under subsection (14) or (15), the Assessment Review Board shall determine the amount of any rebate owing to the applicant.

21Section 364.(17) states:

(17) Same. -- Section 40 of the Assessment Act applies to a complaint under subsection (14), (15) or (24) as if it were an appeal under subsection 40 (1) of that Act, except the assessment corporation shall not be a party for purposes of subsection 40 (11) of that Act.

22Section 364.(20) states:

(20) Interest. -- The municipality shall pay interest, at the same rate of interest that applies under subsection 257.11 (4) of the Education Act, on the amount of any rebate to which the applicant is entitled under this section if the municipality fails to rebate or credit such amount within 120 days, or such later date as the Minister of Finance may prescribe, of the receipt of the application or interim application.

[Ontario Regulation 325/01](https://www.canlii.org/en/on/laws/regu/o-reg-325-01/latest/o-reg-325-01.html)

23In making its determination, the Board has had regard to the following provisions of Ontario Regulation (“O. Reg”.) 325/01, in respect to the industrial and commercial portion of the building.

24Section 325.1(1) states:

1. (1) Eligible property. -- A building or structure on property that is classified in one of the commercial classes or industrial classes is prescribed to be an eligible property for the purposes of section 364 of the Act for a period of time if,

(a) the period of time is at least 90 consecutive days; and

(b) no portion of the building or structure was used at any time in the period of time.

25Section 325.1(2) states:

(2) A portion of a building on property that is classified in one of the commercial classes is prescribed to be an eligible property under section 364 of the Act for a period of time if, the period of time is at least 90 consecutive days and throughout that period of time;

(a) the portion of the building was not used and was clearly delineated or separated by physical barriers from the portion of the building that was used; and

(b) the portion of the building,

(i) was capable of being leased for immediate occupancy,

(ii) was capable of being leased but not for immediate occupation because it was in need of or undergoing repairs or renovations or was not under construction, or

(iii) was unfit for occupation.

26Section 325.1(3) states:

(3) A portion of the building on property that is classified in one of the industrial classes is prescribed to be an eligible property under section 364 of the Act for a period of time if,

(a) the period of time is at least 90 consecutive days; and

(b) throughout the period of time, the portion of the building was not used and was clearly delineated or separated by physical barriers for the portion of the building that was used.

27Section 325.1(4) states:

(4) The following rules apply for the purposes of subsections (1), (2) and (3):

1. A reference to a period of at least 90 consecutive days shall be read as a reference to a period of at least 89 consecutive days if the period includes all of February.

2. The following, in the absence of other activity, does not constitute the use of a building or structure or a portion of a building:

i. Construction, repairs or renovations of the building, structure or portion of the building.

ii. The heating, cooling, lighting or cleaning of the building, structure or portion of the building.

iii. The presence of fixtures.

28Section 325.1(5) states:

(5) Despite subsections (1), (2) and (3), a building, structure or portion of a building is not prescribed to be an eligible property under section 364 of the Act for a period of time if,

(a) it is used for commercial or industrial activity on a seasonal basis;

(b) it is leased to a tenant who is in possession of the leasehold interest throughout the period of time; or

(c) it is included in a subclass for vacant land under subsection 8(1) of the Assessment Act throughout the period of time.

REASONS FOR DECISION

Board Deliberations

29In reviewing all of the above submissions it is clear to the Board that the subject property had already been leased starting December 13, 2013.

30The property was sold January 16, 2014. The new owner agreed with the terms of the existing lease detailed on page 20 which required it to do extensive work to the property both internally and externally in advance of the July 1, 2014 occupancy date.

31The Board fails to understand why Mr. Gambeta did not enter the entire lease document into evidence as it becomes very clear to the Board from pages 14 and 15 that the tenant had access to the office premises starting February 1, 2014 and the warehouse area starting May 1, 2014.

32The Board refers to the following facts in making its decision;

(a) A lease is already in place and the tenant had early access to the office portion starting February 1, 2014 and the warehouse starting May 1, 2014 and there is no evidence provided to define what is meant by early access.

(b) No evidence to understand the impact of the internal and external work on the overall premises including the schedule and magnitude of work and whether any portion of the building could potentially be leased in conjunction with the construction.

(c) No evidence of area separations within the facility and therefore no understanding of whether there were areas that could and were available for lease.

(d) No evidence provided that the property was officially on the market for lease other than CRBE’s verbal communication with potential tenants – as Mr. Gambeta stated they “put out the word”.

33The Board concludes that based on the evidence provided there does not appear to have been a serious attempt by the property owner to lease the property in the interim period. Furthermore, there was insufficient evidence to determine whether any portion of the building was eligible for the vacancy rebate as defined in O. Reg. 325/01 1.(1) (b).

34The Board’s decision is that the municipality was justified in rejecting the application and that the rebate owing is determined to be NIL for the 2014 taxation year.