Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: December 22, 2016 FILE NO.: ID 142592

Assessed Person(s): Sota Holdings Ltd. Appellant(s): Sota Holdings Ltd. Respondent(s): City of Brampton Property Location(s): 443 Railside Drive Municipality(ies): City of Brampton Roll Number(s): 2110-060-001-08838-0000 Complaint Number(s): 3173359 Taxation Year(s): 2015 Hearing Event No.: 637769

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

Heard: September 13, 2016 in Brampton, Ontario

APPEARANCES:

Parties	Representative
Sota Holdings Ltd.	Dorota Marshall
City of Brampton	Aida Karreman

INTERIM DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property is a 12,507 square foot (“sq. ft.”) portion of a larger industrial/commercial building. The area subject to this complaint is on two levels, with 4,965 sq. ft. on the first floor and 7,542 sq. ft. on the second floor (“subject area”). The subject property is owned by Sota Holdings Ltd. and was previously leased to an associated company, Sota Wall Inc. The Complainant contends that the subject area of the building was vacant, commencing in July 2015 through December 2015.

2In accordance with the Municipal Act, 2001 (“Act”) the complainant filed an application for vacant unit rebate, to have a portion of the taxes payable returned by the City of Brampton (“City”). The application for vacant unit rebate was filed on February 10, 2016. The parties agree that the application was made prior to the deadline stipulated in the Act. On April 27, 2016, the City issued an ‘Incomplete Notice’, advising the applicant that a real estate listing agreement and a termination notice for the area of the building applied-for was missing from the application and that information was required by the City by May 27, 2016.

3Subsequently, the City issued a ‘Letter of Rejection’ on June 2, 2016. The City provided the following explanation for the rejection of the application:

The application is being rejected because applicant has not provided previously requested information.

4The dispute between the parties arises from three things. Firstly, there is the question of whether or not the use (or ‘non-use’) of the property meets the definition in the Act and Ontario Regulation 325/01, (“O. Reg. 325/01”) of vacancy. Secondly, there is the question of whether or not the Complainant met the requirements of the City in making its application. Lastly, there is a question of the classification of the property subject to the complaint.

5The Board must determine if:

• The subject area was vacant during the time stipulated by the Vacant Unit Rebate application, and if so, the vacancy was for at least 90 days;
• The application filed by the Complainant met the requirements of the City;
• The applicable parts of O. Reg. 325/01 apply to the Industrial property class or the Commercial property class; and
• A Vacant Unit Rebate is payable by the City, and if so, the amount of that rebate.

LEGISLATION

6In making its determination on this complaint, the Board must consider the applicable parts of the Act and O. Reg. 325/01:

7Section 364.(1) to (14) of the Act, states:

Vacant unit rebate

364. (1) 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).

Requirements of program

(2) 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, or such other percentage as may be prescribed, 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, or such other percentage as may be prescribed, 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.

Mixed use

(3) If a portion of a property is classified on the assessment roll in any of the commercial classes and another portion of the property is classified in any of the industrial classes, the portion classified in the commercial classes shall be deemed to be one property and the portion classified in the industrial classes shall be deemed to be another property for the purposes of this section.

Regulations

(12) The Minister of Finance may make regulations,

(a) prescribing the requirements for a property or portion of a property to be eligible property;

Complaint

(14) 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.

8O. Reg. 325/01 – Section 1(1) to (6) states:

Eligible property

1. (1) 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.

(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 the 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 occupation,

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

(iii) was unfit for occupation.

(3) A portion of a 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 from the portion of the building that was used.

(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.

(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.

(6) Despite subsections (1) and (2), a building or structure or portion of a building is not prescribed to be an eligible property under section 364 of the Act if it is in the resort condominium property class.

WAS THE SUBJECT PROPERTY VACANT?

9Ms. Marshall submitted that the vacancy of the subject area began on July 3, 2015. She provided email communication to support this date, between coordinators of the office move and the staff affected. Ms. Marshall carried out an inspection of the premises on July 30, 2015 and while the original application was for vacancy starting on July 3, 2015 she is satisfied that the vacancy began on July 30, 2015 based on her personal review. The date of departure from the premises was not refuted by Ms. Karreman. Ms. Marshal testified that the office space is separated from the rest of the industrial building by a solid demising wall. This was also not refuted by the City.

10Ms. Marshall also provided the Board with photographic evidence of the state of the subject property after it was vacated by the previous occupants. The subject area of the building had been fitted out to support office use, and from the photographs it is apparent that the offices were no longer occupied. There were some desks still in the space and there were remnant files, lying on the floor of one of the demised offices. Larger common areas were vacated completely. Ms. Marshall cited s. 1.(4) 2.iii of O. Reg. 325/01 which indicates that the presence of fixtures does not constitute the use of a portion of a building. She submits that the desks present in the office area are fixtures within the meaning of O. Reg. 325/01. Further, Ms. Marshall contended that the presence of inert fixtures or furnishings cannot be considered a ‘use’ unless someone is using them for their normal purposes and in this case, for some material industrial or commercial benefit.

11When leased to Sota Wall Inc., the space was used by the design team and the uses consisted of general offices and drafting and design operations involving computer drafting equipment, printers, plotters, layout tables and similar equipment. None of this material was left behind after the move.

12Ms. Karreman submitted that the presence of some office furniture and the files in the photographs cast doubt on the Complainant’s assertion of vacancy. She further submitted that if a sufficient amount of material left behind after the move was present, this would constitute storage and therefore, in the opinion of the City, constitutes use within the meaning of O. Reg. 325/01.

13The Board agrees with Ms. Marshall. From the photographic evidence submitted, the Board is convinced that the subject area is not in use. The Board further agrees that the presence of some remnant furnishings, in this case desks, does not in itself constitute use, and rather than being ‘storage’ the desks remaining have simply been vacated and not yet removed. The Board notes that there are relatively few desks left behind.

WAS THE SUBJECT PROPERTY VACANT FOR AT LEAST 90 DAYS?

14Ms. Marshall’s submission is that she personally inspected the premises on July 30, 2015 and at that time the space was essentially vacant, as depicted in the photographs. She testified that, even though the email communication in evidence shows the departure date of staff from the premises to be July 2, 2015, some additional ‘clean up’ occurred after that date. Having determined that the subject area meets the definition of vacant, the Board accepts Ms. Marshall’s testimony of having verified that vacancy on July 30, 2015.

15The Board finds that the vacancy began on July 30, 2015 and that the vacancy continued for the remainder of the year, totaling 155 days in the 2015 taxation year.

DID THE APPLICATION MEET THE REQUIREMENTS OF THE CITY?

16Section 364 of the Municipal Act requires the Municipality to have a program to provide tax rebates to owners of properties that have vacancies, if those properties are in any of the commercial or industrial property classes.

17The City’s rejection letter cited two reasons for its decision; the absence of a real estate listing offering the property for lease, and a termination of the lease document between the owner and the previous tenant.

18Ms. Marshall clearly submitted that the subject area was not actively being advertised for lease. In fact, her testimony is that the owner prohibits the lease of the subject area for tenants who are not connected with the industrial operation that occurs on the rest of the property for security reasons. The previous tenant, Sota Wall Inc. was a separate but related company to the owner, Sota Holdings Ltd.

19With respect to the termination of the lease between Sota Holdings Ltd. and the tenant Sota Wall Inc., Ms. Marshall provided a rent ledger, indicating that lease payments were made regularly in the amount of $7,000 per month. For the month of July, 2015, that rate was reduced owing to the tenant not occupying the space for the entire month. Subsequent months (August 2015 and onward) showed no rents being paid.

20The Board is satisfied that this ledger reflects the true relationship of the rental agreement between the tenant and landlord and accepts it as sufficient evidence of the termination of the lease agreement between the two parties.

WHAT IS THE PROPERTY CLASS OF THE SUBJECT PROPERTY

21At the time of the application for vacant unit rebate, the parties agree that the assessment of the overall property was apportioned as follows:

• Commercial property class - $240,000
• Industrial property class - $5,086,000

22Neither party was able to establish the existing classification of the portion of the property subject to the complaint. The Complainant contends that the office area is part of the industrial assessment of the overall subject property. The City believes that the commercial apportionment applies to the area of the building subject to the complaint.

23This distinction is important in the Board’s determination of the complaint, as property in the Industrial property class is treated differently from property in the Commercial property class in O. Reg. 325/01, when determining eligible property under the City’s vacant unit rebate program.

24The salient distinction in O. Reg. 325/01 is the requirement under subsection (2), in the Commercial property class, that the portion of the building “… was capable of being leased for immediate occupation”. There is no such requirement in the O. Reg. 325/01 for property in the Industrial property class.

25Ms. Marshall believes the subject property is in the Industrial property class and submits that, as a result, there should be no evidentiary requirements in the application to prove that the area was being listed for lease or that any effort needed to be demonstrated that leasing of the area was being attempted.

26Ms. Karreman asserts that the subject property is in the Commercial property class and as a result, the City’s requirement for a listing or some other method of offering the area for lease and a termination notice are required, and that a vacant unit rebate in the Commercial property class in this case is not payable as a result.

27The Board requires more evidence than belief and assertion by the parties to determine property class. Unfortunately neither party provided documentary evidence to support their positions. As a result the Board was unable to determine the property class.

INTERIM DECISION AND ORDER OF THE BOARD

28The Board finds that the subject area of the building at 443 Railside Drive was vacant in the 2015 taxation year, commencing on July 30, 2015 and continuing through December 31, 2015.

29The Complainant and the City are directed to make written submissions to the Board regarding:

• the classification of the subject area of the property;
• the source of the information used to form their opinion;
• any documentary evidence to support their position; and
• the amount of the vacant unit rebate payable, if the Board determines that the subject area of the property is in the Industrial property class

30The submissions shall be made to the Board within 60 days of the release of this interim decision.

31Upon receipt of the written submissions of the Parties, the Board will render a final decision on the complaint, or will reconvene the hearing if necessary to make its decision.

32In the event that a hearing is reconvened for determination by the Board, this Member is seized.