Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE: November 14, 2017
Assessed Person(s): Canadian Property Holdings (Ontario) Inc.
Appellant(s): Canadian Property Holdings (Ontario) Inc.
Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15
Respondent(s): City of Mississauga
Property Location(s): 3047 3055 Vega Boulevard
Municipality(ies): City of Mississauga
Roll Number(s): 2105-150-084-01000-0000
Appeal Number(s): 3123028
Taxation Year(s): 2014
Hearing Event No.: 683172 and 686579
Legislative Authority: Section 357.(7) of the Municipal Act, 2001 S.O. 2001, c. 25, as amended
Heard: July 21, 2017 and August 1, 2017 in Mississauga, Ontario
APPEARANCES:
Parties
Counsel
Canadian Real Estate Investment Trust (“CREIT”)
Richard Minster
City of Mississauga
John O’Kane
DECISION OF THE BOARD DELIVERED BY J. L. WALKER
INTRODUCTION
1The Erin Mills Power Centre is a commercial property with multiple tenants in seven separate buildings. 3055 Vega Boulevard, a stand-alone, purpose-built building and the largest portion of the subject property, was previously used as a Cineplex Odeon Theatre (“Cineplex”). Cineplex ceased operations on May 31, 2014 and a new tenant, L.A. Fitness, commenced operations on June 1, 2015. Canadian Property Holdings (Ontario) Inc. (“CREIT”) states that the intervening year was used to demolish the existing purpose-built Cineplex structure and construct a structure for its new use as a fitness facility.
2On February 26, 2015 CREIT applied for a vacant unit rebate under s. 364 of the Municipal Act, 2001, S.O. 2001, c. 25 as amended (“Act”) for the period of May 29, 2014 – December 31, 2014. On the same date, CREIT also applied under s. 357(1)(d)(ii) of the Act for a cancellation, reduction or refund of part of its taxes, on the basis that it was damaged by demolition which rendered it substantially unusable for the purposes for which it was previously used, for the period of June 1, 2014 to December 31, 2014. The City of Mississauga (“City”) processed the vacancy rebate application and issued a tax refund to CREIT. The City denied the s. 357 application and CREIT has appealed this decision to the Assessment Review Board (“Board”).
3Richard Minster, counsel for the applicant CREIT, submits that the taxpayer is entitled to contemporaneous tax relief under both s. 364 and s. 357(1)(d)(ii) of the Act. He argues that s. 357 is intended to provide the taxpayer with relief to deal with “midyear” changes to a property; that the evidence supports the extent of the change to the subject property; and that the quantum of the rebate can be calculated having regard to the adjustments made to the 2015 current value of the subject property for the same reason.
4John O’Kane, counsel for the City, argues that CREIT is not eligible for relief under s. 357(1)(d)(ii) as the change to the subject property is in the nature of a repair or renovation, and as such, is not eligible for further tax relief under the Act. He further submits in the alternative that if the Board were to determine that the change was damage by demolition, that CREIT may only obtain tax relief for the period of time in which the damage by demolition occurred, exclusive of the period of re-construction.
5The Board must determine the following issues:
a. Is a taxpayer entitled to contemporaneous relief under both s. 364 and s. 357(1)(d)(ii) of the Act?
b. If yes, do the facts of the present case demonstrate that the taxpayer is entitled to relief under s. 357(1)(d)(ii) for the period of June 1, 2014 to December 1, 2014?
c. If yes, what is the quantum of the relief under s. 357(1)(d)(ii) for the period of June 1, 2014 to December 1, 2014?
DECISION
6The Board finds that a taxpayer is entitled to contemporaneous relief under both s. 364 and s. 357(1)(d)(ii) of the Act. There is not statutory barrier to a taxpayer being entitled to relief under both sections, if the facts support both heads of relief. Section 364 and Ontario Regulation 325/01 (”O. Reg. 325/01) are intended to provide tax rebates to owners of eligible properties that have vacant portions. Section 357(1)(d)(ii) has a different purpose, which is to provide tax relief for a mid-year change in value after the return of the assessment roll for “damage by fire, demolition or otherwise.” They are two different categories of tax relief that are not mutually exclusive. O. Reg. 325/01, made pursuant to the Act, includes a mechanism for recalculating the refund previously paid under s. 364 for the same period of time.
7The Board finds that the evidence demonstrates that the subject property was damaged by demolition so as to render it substantially unusable for the purposes for which it was used immediately prior to the damage from June 1, 2014 – December 31, 2014. The Board orders that a refund be paid to CREIT in the amount of $49,744.17.
REASONS FOR DECISION
Legislation
8In making its determination, the Board considered the provisions of the Municipal Act, 2001 S.O. 2001, Chapter 25 (“Act”); Ontario Regulation (“O. Reg.”) 325/01, made pursuant to s. 364(11) of the Act; and the Building Code Act, 1992, S.O. 1992 c. 23 (“BCA”). The relevant sections of the legislation are set out in Appendix A.
Is a taxpayer entitled to contemporaneous relief under both [s. 357(1)](https://www.canlii.org/en/on/laws/stat/so-2001-c-25/latest/so-2001-c-25.html#sec357subsec1_smooth)(d)(ii) and [s. 364](https://www.canlii.org/en/on/laws/stat/so-2001-c-25/latest/so-2001-c-25.html#sec364_smooth) of the [Act](https://www.canlii.org/en/on/laws/stat/so-2001-c-25/latest/so-2001-c-25.html)?
9Section 357(1)(d)(ii) and s. 364 of the Act serve different purposes. Without clear statutory language prohibiting both from applying, it must have been the legislature’s intention that both could apply to the same property in the same taxation year if the facts supported both forms of relief. Section 357(1)(d)(ii) has evolved through various iterations of the assessment acts and the municipal acts to provide “essential justice” to the taxpayer, who must fall within the “exonerating” provision for the discretionary relief sought. It enables an application for a reduction in taxes that results from a mid-year change after the return of the assessment roll.
10Counsel provided the Board with a line of authority regarding the principles of statutory interpretation; the application of s. 357(1)(d)(ii), and the interplay between this section and s. 364 of the Act.
11In interpreting s. 357 of the Act, the Board is guided by the rules set out by the Supreme Court in Quebec (Communaute urbaine) c. Notre-Dame de Bonsecours (Corp.), 1994 CanLII 58 (SCC), [1994] 3 S.C.R. 3 (“Notre-Dame de Bonsecours”) and the modern approach to statutory interpretation. Upon applying these principles, and having regard to the historical background of these sections, the Board finds that there is no statutory impediment to a taxpayer seeking relief under s. 357(1)(d)(ii) for a midyear change to the property contemporaneous with relief under s. 364 of the Act for a vacancy.
12In Notre-Dame de Bonsecours (at para 38) the modern approach to interpreting taxing legislation is stated:
The interpretation of tax legislation should follow the ordinary rules of interpretation;
A legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and the legislative intent: this is the teleological approach;
The teleological approach will favour a taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions;
Substance should be given precedence over form to the extent that it is consistent with the wording and the objective of the statute;
Only a reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer.
13The taxing provisions of the Act are remedial in nature, and this is the lens through which the Board has considered the present case: see generally Wilkes and Interlake Tissue Mills Co. Ltd., 1968 CanLII 40 (ON CA), [1968] 2 O.R. 589 (Ont. C.A.) (“Wilkes and Interlake”); St. Catherines (Assessment Commissioner) v. Interlake Tissue Mills Co., 1969 CanLII 9 (SCC), [1970] S.C.R. 441 (“St. Catherines and Interlake”); National Trust Co. Ltd. v. Hamilton (City) (1987) 20 O.M.B.R. 198 (O.M.B.) (“National Trust”); 810277 Ontario Ltd. v. Regional Assessment Commissioner, [1995] O.M.B.D. No. 359 (810277 Ontario Ltd.); Lanxess Inc. v. Municipal Property Assessment Corp. Region No. 26, [2009] O.A.R.B.D. No. 93, 63 O.M.B.R. 164 (“Lanxess v. MPAC”); Lanxess Inc. v. Sarnia (City), (2009) 63 O.M.B.R. 164 (ARB) (“Lanxess v. Sarnia”); General Motors of Canada Ltd. v. St. Catherines (City), [2006] O.A.R.B.D. No. 86, 52 O.M.B.R. 287 (“General Motors”); Haldimand County v. U.S. Steel Canada Inc., 2016 ONSC 5286 (‘Haldimand County’).
14Mr. Minster made submissions regarding the historical background concerning demolitions, renovations, business tax and mill rates, and provided the Board with a summary of the discussion in Walker & Grad, Ontario Property Tax Assessment Handbook, 2d. ed. (Toronto: Carswell, 2014) (Walker & Grad) (generally at 10-27 to 10-30).
15Prior to the tax and assessment reforms for the 1998 tax year, there was both Realty Assessment and Business Assessment. The latter was a percentage of the Realty Assessment, adding from 30% to 75% to the tax bill based on the use of the property for business. The business tax was a personal tax on the business occupying the property; the tenant of the property had the responsibility to pay it, and not the owner.
16When the business use ceased due to vacancy, the business tax was removed and there was a conversion from the Commercial Mill Rate to the generally lower Residential Mill Rate. From 1998-1999, vacant property was placed into the Vacant Property Class to achieve a lower tax rate, which was generally 30% to 35% lower. After further reform in 2000, responsibility for dealing with most types of business vacancies shifted. MPAC was required to return the property at the full commercial or industrial tax rate, and it was then the taxpayer’s responsibility to apply to the City for the s. 364 rebate under the Municipal Act and its regulations.
17The assessing and taxing acts together are a complete statutory code for property assessment and taxation. Pursuant to s. 341(1) and (2) of the Municipal Act, a taxpayer is not entitled to relief until any appeals or other adjustments are made under the Assessment Act, R.S.O. 1990, c. A. 31, as amended (“Assessment Act”) have been finalized and the tax roll has been adjusted. Section 357(1)(d)(ii) is intended to provide the taxpayer with relief to deal with a midyear change that he is unable to address in an appeal of the assessed value. This is evident from the language of s. 357.(1)(d), “during the year or during the preceding year after the return of the roll.”
18The line of authority before the Board demonstrates the remedial nature of the legislation through its various iterations, and the changing approach to statutory interpretation. In Wilkes and Interlake, the court held that s. 131 of the Assessment Act (R.S.O. 1960, c. 23), a predecessor to the present s. 357, was a remedial section which empowered a Court of Revision to do an “essential justice” to a taxpayer who has suffered a loss through vacancies, or on other grounds set out in s-s(1), which at that time included overcharge by reason of gross or manifest error. In overturning the Ontario Municipal Board’s (“OMB”) decision, the court stated that it had placed too narrow a construction on s. 131, and found that “it would appear that the legislators have given a broad discretionary power to the Courts of Revision to do what justice and equity may require in cases falling within the purview of s-s(1)” (at page 4).
19The Supreme Court agreed with this finding in St. Catherines and Interlake. Spence J. commenting on the evolution of the section stated (at page 446):
I am of the opinion that this survey of the course of amendments through the years demonstrates clearly that the legislature intended to remedy to the taxpayer and that the scope of the remedy has been steadily broadened throughout the years to that provided in the present section.
20In his dissent, Judson J. disagreed that relief should be granted in this case, on the basis that the taxpayer must appeal under s. 72 (now s. 40) within the time limits fixed by the Assessment Act, clarifying that s. 131 was limited to taxpayers affected by mid-year changes.
21In 810277 Ontario Ltd. the OMB reiterated the dicta in Wilkes and Interlake, adopted by the Supreme Court in St. Catherines and Interlake, that these provisions:
…are remedial sections which allows the Assessment Review Board or the Board to do essential justice, has been accepted as the right interpretation of legislative intent…designed by the legislature to provide for the necessary safety-valves and individual reliefs in an otherwise mechanistic edifice that generates the necessary sources of municipal revenue” (at page 2).
The OMB added that in order to obtain this discretionary relief (under what was then s. 440(1)(c)(ii) of the Act), the claimant must be squarely within the exonerating provision to balance taxpayer relief with the objective of generating municipal revenue.
22In General Motors, the Board determined that the provisions of s. 442(1) and s. 442.5 of the Municipal Act (the predecessors to s. 357 and s. 364) were not exclusive but complimentary (at para 6). In the present case this question is squarely before the Board albeit for damage by demolition rather than for renovations or repairs, as was the case in General Motors.
23In considering the relationship between s. 357 and s. 364 of the Act, the Board is mindful of the modern approach to statutory interpretation articulated by Elmer Driedger, and declared to be the preferred approach of the Supreme Court:
Today there is only one principle or approach, namely the words of an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intentions of Parliament (Ruth Sullivan, Sullivan on the Construction of Statutes (LexisNexis Canada, 5th ed., 2008) at page1).
24Upon applying these principles of statutory interpretation, the Board finds that there is no statutory impediment to the relief sought under s. 357(1)(d)(ii) contemporaneous with the relief obtained under s. 364 of the Act. Under s. 357.(1), a municipality may cancel, reduce, refund all or part of the taxes levied upon the land in the year is respect of which the application is made if the taxpayer can demonstrate that a property falls with one of eight legislated circumstances. In the present case, the taxpayer has applied for a rebate under s. 357.(1)(d)(ii), “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”, which the City denied on the basis that what had occurred at the subject property was a repair or renovation pursuant to s. 357.(1)(g).
25Section 364 and the related regulation are intended to provide tax rebates to owners of eligible properties that have vacant portions. Section 357(1)(d)(ii) has a different purpose, which is to provide tax relief for a mid-year change in value after the return of the assessment roll for “damage by fire, demolition or otherwise”. They are two different categories of tax relief that are not mutually exclusive.
26It is very clear in s. 357(1.1) that no cancellation, reduction or refund of taxes is permitted in respect of prescribed land under (1.1)(g) that has obtained tax relief under s. 364 due to vacancy for repair or renovation. The Board does not agree with Mr. O’Kane’s submission that the legislators intended to extend it to s. 357(d)(i) and (d)(ii) when the Act was amended in 2007. The plain fact is that they did not.
27The Board agrees with Mr. Minster that, if anything, it was anticipated that an application could be made under either s. 357 or 358 as well as under s. 364. Section 4.(1) of O. Reg. 325/01 provides that “The municipality shall recalculate the amount of a rebate in respect of an eligible property if the taxes are reduced under section 357 or 358 of the Act or if the assessment for the property changes…..” (Board’s emphasis).
28While there is no statutory impediment to this contemporaneous relief, the evidence must demonstrate that the taxpayer falls within the ambit of this provision, which engages a consideration of the meaning of s. 357(1)(d)(ii), an appeal under s. 357 places the applicant in the same position as it was in its appeal before municipal council, as the under s. 357(10) the Board may “make any decision that council could have made.” The onus is on the taxpayer seeking relief to demonstrate that it falls within the exonerating provision.
Do the facts of the present case demonstrate that the taxpayer is entitled to relief under s. 357(1)(d)(ii)?
Motivation of the Taxpayer
29Mr. O’Kane submits that relief under s. 357(1)(d)(ii) should not be available where the taxpayer has of its own volition initiated the change to the improvement. He refers the Board to City and Toronto and Crown Life Insurance, an earlier (date unknown), unreported and seemingly now inaccessible case (referenced in National Trust), in which the OMB ruled against a “voluntary, partial demolition and reconstruction.”
30This finding, in the Board’s view, placed too narrow a construction on the legislation, which defeated the objective of taxpayer relief. This may have been (briefly) arguable under the initial enactment of s. 357 in the Act in 2001, in which relief was only granted if “the destruction or damage did not occur as a result of a voluntary act”, but this provision was repealed in the same year and the original wording in s. 442 was reinstated (Walker & Grad at 10:70.5).
31The Board also does not find the OMB’s finding in Domtar Inc. v. Regional Assessment Commissioner, Region No. 22 (1985) 18 O.M.B.R., 425 (“Domtar“) to be of assistance. The taxpayer argued that the property was damaged due to an order of the Ministry of the Environment to replace two recovery furnaces, which it characterized as “otherwise” under s. 496. Relief was denied to the taxpayer on the basis that it was a management decision which, in the Board’s view, defeated the objective of taxpayer relief.
32The court has held that the reason for a vacancy does not in itself disqualify a taxpayer from relief. In The Corporation of Haldimand County v. U.S. Steel Canada Inc., 2016 ONSC 5286 (“Haldimand County”), the municipality appealed the decision of the Board that U.S. Steel Canada Inc. was entitled to a vacancy for periods during which the production of steel ceased due to a lock out of its employees. The Divisional Court upheld the Board’s determination that the reason for the vacancy did not disqualify the taxpayer from an entitlement to a vacancy rebate (at page 1):
The Board reasonably concluded that the reason for the vacancy (the lockout of employees) did not disqualify the respondent from entitlement to a vacancy rebate. The Board found that the purpose of the vacancy rebate program is to lessen the tax burden on properties due to a reduction in the property’s productive capacity to bear taxes, that a property that is not being used will not be productive regardless of why it is not being used, and that the board was not authorized by the applicable legislation to inquire into the business reasons for a cessation of production.
33Accordingly, CREIT’s “motivation” in this matter is irrelevant to the Board’s inquiry. The Board does not agree that the s. 357 (1)(d)(ii) sustains an interpretation which incorporates a consideration of motivation.
Words and Phrases
34There is no dispute as to whether the application was properly made “during the year or during the preceding year after the return of the assessment roll” or whether the subject property qualifies as a “building on the land.”
35Both counsel proffered authorities where the Board has considered this section; various definitions of the individual terms contained within it; and the differences between “razed”, “damaged” and “renovation.” While the Board agrees with counsel that these words have individual meanings, they must be read in their entire context of the section, in their grammatical and ordinary sense, harmoniously with the scheme and object of the Act.
36The Board accepts Mr. Minster’s submission that, when read together, s. 357(1)(d)(i), (1)(d)(ii) and 1(g) describe the extent of change to a property, the least of which is repair or renovation which is not entitled to the “two pools” of tax relief. In this context “damaged by demolition” is a separate category from “razed by demolition” which is accepted by both parties as destroyed to the ground. The meaning of “damaged by demolition” is derived from the phrase “so as to render it substantially unusable for the purpose for which it was used immediately prior to the damage.”
37This submission is supported in National Trust, where the OMB considered the differences between subsections (1)(d)(i) and (ii) under an earlier version of the Act. With regard to the latter section the OMB stated (at page 3) that:
The Board examined subcl. (ii) and noticed that it could have said, but did not say, demolished means razed to the ground, but specifically says demolished so as to render it substantially unusable for the purposes for which it was used immediately prior to the damage. Some meaning must be given to these words or the intent of the legislature would be avoided. The addition of the clause in 1979 obviously was intended to expand the rights of the taxpayer….
38In s. 357(1)(d)(ii), “damage by demolition” suggests that what is meant is more than a repair or renovation, but less than razed to the ground. In the Board’s view, the phrase “damage” includes a partial demolition.
39Mr. O’Kane submits that if the Board should find that the property was damaged by demolition, that the period of eligibility for relief should end when the reconstruction began, returning the property to a “substantially usable state” and increasing its value. If any relief is owed, it must be only for the period in which it can be demonstrated that the damage by demolition occurred, and that it should not include the reconstruction period.
40The Board agrees with Mr. Minster that the change in value must reflect the entire period that the property remains substantially unusable, as the OMB held in National Trust:
It is not the act of demolishing which is being exempted, or failure to demolish which is being charged for, but rather the existence of the building in a form which can be said to be substantially unusable for the purposes for which it was used immediately prior to the damage which is giving rise to the exemption. If the building cannot be used, it should then be exempt and if the building is not yet in that position, then it should not be exempted (at page 3).
41In Lanxess v. MPAC, the Board considered whether the evidence of water damage incurred as part of a decommissioning process established that a building was damaged as to render it “substantially unusable.” That panel of the Board held (at para 24):
In the Board’s view, the purpose and the scheme of the Act is revealed by the words “so as to render it substantially unusable for the purposes it was used immediately prior to the damage.” Subsection 357.(1)(d)(ii) has as its purpose, a means by which the building owner can obtain relief from taxes, where the damage renders the building “substantially unusable.”
42The Board does not agree that the period of damage by demolition can be pro-rotated to exclude the time spent on reconstruction, as the property still remains “substantially unusable.” In the Board’s view, the notion of pro-rating refers to a period of time in the year in which the property was vacant and substantially unusable, and not portions of the time within that period. A building remains “substantially unusable” until it is back in a state where it is usable again. The Board accepts the OMB’s reasoning in 810277 that it must consider “whether from an operational, physical or regulatory standpoint” the building could not be utilized for the purpose for which it was used immediately prior to the damage (at page 3).
43Mr. O’Kane’s further argues that the fact that the property was vacated in order to begin the demolition changed its use, rendering it ineligible for tax relief. In 810277, the OMB also considered the meaning of “substantially unusable” and “immediately” and determined that the question of a vacancy was a red-herring. The OMB held that the fact that the property was vacant prior to the alleged damage occurring was not a bar to tax relief, and that a strict interpretation, as advanced by the City in this case, would render the provision meaningless (at page 3). This panel of the Board agrees, and finds that the subject property was used as commercial leasable space immediately prior to the alleged damage by demolition.
44Mr. O’Kane referred the Board to Toronto (City) v. Plymbridge Investments Ltd. (Unreported, March 14, 1985 OMB) (“Plymbridge”), which he submits is a significantly persuasive, if not a controlling authority.
45In Plymbridge the taxpayer sought relief under s. 496(1)(c)(ii) of the Act (R.S.O. 1980, c. 302, as amended) for three residential apartment buildings that underwent substantial renovations. There the taxpayer argued that the substantive renovation work damaged the building, and qualified for relief under the phrase “or otherwise”; the City argued that it did not.
46In denying the application, the OMB applied the ejusdem generis rule of statutory interpretation to “otherwise” and found that in the context of the meaning of the words “fire” and “demolition”, the word “otherwise could not be construed to include renovations. The OMB concluded that “fire” and “demolition” have the opposite connotation to renovation, which the OMB held had, if anything, improved the value of the property. The OMB also found that the use of the building immediately before the work was started was vacant as the tenants had vacated approximately three months earlier, and therefore did not render the building substantially unusable as a vacant building. Lastly, the Board noted that the renovations had commenced prior to the close of the appeal period for the relevant assessment year, but the taxpayer did not appeal under the Assessment Act.
47The OMB correctly concluded that a taxpayer cannot obtain relief under the Act for changes that are properly the subject of an assessment appeal. However, the Board distinguishes Plymbridge from the present case as the taxpayer is not arguing that changes to the property fall into the ambit of “otherwise” but damage by demolition; the facts concerning the period of use immediately prior and the timeliness of the application are quite different. The Board also does not agree with the OMB’s premise that “reconstruction and improvement factors outweigh the damage” (Plymbridge at page 4), as this interpretation would render the provision meaningless.
48Mr. O’Kane also referred the Board to Re Sakala et al. v. Hamilton (1984) 17 O.M.B.R., 110 (“Re Sakala”), one of a series of cases before the OMB for claims made under s. 496 of the Act for damage by “otherwise”, caused by insulation with urea formaldehyde foam insulation in residential properties. In denying the application, the OMB held that s. 496 could not be relied upon when the taxpayer has failed to make an appeal of value, and in any event, in cases where the property remained in use.
49The Board does not rely on those authorities argued under the rubric of “otherwise”, which engages a different legal argument and different facts than “demolition” in the present case. The case before the Board involves a mid-year change after the return of the roll, and is not a situation where the taxpayer has failed to seek a remedy under the Assessment Act. It is clear that the evidence must be considered within the ambit of the subsection as a whole, rather than on a piecemeal basis, to interpret it in a manner consistent with the principles of modern statutory interpretation.
The Evidence
50The Board finds that at the relevant time the subject property was damaged by demolition so as to render it substantially unusable for the purposes for which it was used immediately prior to the damage.
51The Board heard from three witnesses regarding the changes to the subject property and the history of CREIT’s tax applications. Mr. Minster and Mr. O’Kane each provided an extensive book of documents (Exhibits 1 and 2), which were subject to addendum and correction in the course of the hearing.
52Michael Real is an appraiser with CREIT, with experience in the appraisal of commercial property. In his testimony Mr. Real identified and described documents found in both the appellant’s document book and the document book of the City. He provided the Board with a chronology of events, describing the change to the subject property, and the tax relief applications made by CREIT under the Act.
53Ezio Savini is the Chief Building Official for the City, responsible for overseeing the City’s Building Department, including issuing building permits, and for the enforcement of various aspects of the Building Code across the City. He testified regarding the types of permits generally; the nature and number of permits applied for and issued in respect of the subject property, and the nature and extent of the permitted work.
54Sandra Turnbull is the Supervisor, Assessment Review & Analysis for the City, and is responsible for monitoring assessment appeals and property tax rebate appeals. She is the manager of assessment and property tax for the City. Ms. Turnbull provided evidence regarding the internal processing of applications under s. 364 and s. 357(1)(d) of the Act generally, and with specific regard to CREIT’s applications.
55Mr. Real stated that the declining fortunes of the Cineplex multi-plex theatre in this location led to an early termination of the lease. In order for the premises to be usable by the new tenant, L.A. Fitness, a demolition of the existing internal structure and partial demolition of the exterior was required.
56The sequence of events, as the Board understands it are as follows:
Zoning Certificate Issued to L.A. Fitness February 24, 2014, stated the permitted use as a recreational establishment (Exhibit 10, Tab1);
Cineplex lease amended to expire on May 31, 2014; new lease signed with L.A. Fitness (Exhibit 1, Tab 7);
Application for Permit to Construct or Demolish, filed by Turner Fleischer Architects Inc. on April 25, 2014; proposed work “interior demolition of theatre; existing exterior ramp, stairs & canopy to be demolished” (Exhibit 2, Tab 1);
Building Permit Notice issued on May 29, 2014 for “interior and exterior demolition (including ramp, stairs & canopy)” (Exhibit 1, Tab 2);
Application for Permit to Construct or Demolish filed by Turner Fleischer Architects Inc. on June 30, 2014 for “renovations to entire building” (Exhibit 2, Tab 2);
Building Permit Notice issued August 18, 2014 for “interior alterations – shell building; exterior cladding, canopy, stairs, new windows, roof-top unit (Exhibit 2, Tab 2);
Application for Permit to Construct or Demolish filed by L.A. Fitness on July 17, 2014 for “interior alteration of existing vacant building for new fitness club tenant including installation of new pool/spa and juice bar (Exhibit 3, Tab 3);
Building Permit Notice issued November 7, 2014 for interior alterations, (Exhibit 2, Tab 3).
Work commences June 1, 2014 and was completed May 31, 2015; L.A. Fitness commences operations on June 1, 2015.
57In addition to the testimony of Mr. Real, CREIT also relied on documents to demonstrate the extent of the change to the subject property, including:
Priestly Demolition Inc. Task Planning Form describing “selective demolition work of former movie theatre” (Exhibit 1, Tab 2A);
Architects Schematics of Demolition (Exhibit 1, Tab 4, Exhibit 1B);
Photos and site visit reports of Turner Fleischer Architects Inc. (Exhibit 1, Tabs 5 and 5A, Exhibit 4);
CREIT’s summary of cost of demolition and reconstruction (Exhibit 1, Tab 6);
Vacancy Rebate Applications for 2014 and 2015, attachments and City Responses (Exhibit 1, Tabs 9 and 10, Exhibit 5);
Minutes of Settlement (“MOS”) for 2013 – 2016 taxation years (Exhibit 1, Tab 11);
MPAC GRADs, pre and post mediation settlement (Exhibit 1, Tab 12);
Section 357(1)(d)(ii) Application and City Response (Exhibit 1, Tab 16).
58The main evidentiary issue between the parties is whether the change to the subject property falls into the ambit of “damage by demolition” or “repairs or renovation.” The thrust of Mr. Real’s evidence is that the building was changed from one purpose-built structure to another, involving significant demolition and reconstruction over a year.
Mr. O’Kane submits that CREIT renovated the subject property, applied for a vacancy rebate under s. 364 on the basis of the renovation, and is trying to characterize the work as damage by demolition to obtain unwarranted tax relief.
59Mr. Real was examined and cross-examined regarding the sequence of events;
the scope of “demolition”, “damage by demolition”, “repairs or renovations” generally and with specific regard to the subject property; the tax applications; communications between himself and the City regarding the application and the City’s decision (Exhibits 7 and 12), as well as communications between MPAC’s assessor and the City regarding the value of the subject property.
60Mr. Real acknowledges that within the various permits, there was reference to both demolition and alteration, but stated that the latter operated to return the subject property, now rendered substantially unusable by damage by demolition, to the purpose for which it was used immediately prior, namely a commercial leasable property. He asked that the Board have regard to the detailed demolition plans and schematics prepared by the architect; the photographs which illustrate the gutted interior and the partially removed exterior of the subject property; the work performed by Priestly Demolition; and the progress reports, all of which he submits demonstrate that it was damaged by demolition.
61Mr. Savini characterized the overall change to the subject property as an alteration. He testified that a number of permits issued for the subject property (Exhibit 2, Tab 5) dealt with alterations rather than a complete demolition. He further illustrated this point with reference to a series of Building Permit Notices for the complete demolition of structures at other municipal addresses (Exhibit 2, Tab 6). Mr. Savini maintained that no demolition permit was issued for the property, and that the change of use to the subject property did not affect any major components of the structure, and that the “base building” did not change.
62When asked by Mr. O’Kane to comment on this distinction, he stated that in his world, the alteration of a “material component of the building” is not considered to be a demolition. Under cross-examination, he acknowledged that the view reflected in his testimony was drawn from his understanding of the BCA. He conceded that a “demolition permit” does not exist per se; and that the full spectrum of possible changes to a building may be stated on a Building Permit.
63Mr. Minster referred Mr. Savini to the definition of “demolish” provided in s. 1(1) of the BCA, which states that “demolish” means to do anything in the removal of a building or any material part thereof and “demolition” has a corresponding meaning…” Mr. Savini maintains his understanding that a material change is something more substantial. The thrust of Mr. Minster’s cross-examination of Mr. Savini was to demonstrate that the evidence must be assessed to determine what occurred, rather than the wording set out in the BCA, which is primarily concerned with building standards and safety.
64The witnesses were cross-examined regarding ambiguities in the tax applications, and related communications and processes. Mr. O’Kane characterized Mr. Real’s references to different heads under s. 357.(1)(d) in the applications and associated communications as an attempt to put a square peg into a round hole. The Board found Mr. Real to be forthcoming regarding any misstatement he made, and has no reason to doubt his bona fides. The Board found similar inconsistencies in both the City’s and MPAC’s communications with respect to the applications.
65Ms. Turnbull was questioned regarding how the City arrived at its decision, and the extent to which it relied upon valuation information provided by the assessor. In its responses, made in July and August 2015, MPAC mistakenly stated that the application was made under s. 357(g), renovation or repair, then later erred again by stating that the application was made under s. 357(1)(d)(i). In its last remarks on the August 2015 response, MPAC states that there was no actual demolition of the existing building. MPAC conducted its (external) inspection of the subject property in July 2015. Ms. Turnbull confirmed that the City appears to have accepted MPAC’s recommendation. The City apparently did not conduct any inspection of the property for purposes of the s. 357 application at any point in 2014 and seems to have proceeded on the basis of a paper review.
66The Board agrees with Mr. Minster’s submission that in its determination the Board should focus on what actually happened, which is consistent with the onus to be met, the balance of probabilities. The Board finds that the taxpayer has met its onus and has demonstrated that it falls within the ambit of s. 357(1)(d)(ii).
67In addition to Mr. Real’s testimony, the evidence that informed the Board’s decision are the building permits for the demolition; the demolition outline; the architectural schematics of the demolition; and the photographs and site visit reports of Turner Fleisher Architects, which demonstrate a partial demolition and reconstruction of the subject property from June 1, 2014 – December 1, 2014, the period of the tax application, and ongoing until its completion in mid-2015. The Board finds that this evidence demonstrates that the property was damaged by demolition rather than renovated, and that the property remained substantially unusable for the purposes for which it was used immediately prior to the damage well into 2015. Lastly, Minutes of Settlement for the 2015 taxation year demonstrate that MPAC has granted the same remedy that the taxpayer is seeking to obtain for the 2014 taxation year, based upon a consideration of the same evidence, as described below.
What is the quantum of the relief under s. 357(1)(d)(ii) for the period of June 1, 2014 – December 1, 2014?
68The Act does not specify a method for calculating the quantum of relief under the subsection, beyond the proviso in s. 4.(1) of O. Reg. 325/01 that any rebate made to an eligible property is to be recalculated if taxes are reduced under s. 357 of the Act. The result is not “double dipping” but a harmonization of the relief to the taxpayer for loss of income and for mid-year changes to a property.
69In 151516 Canada Inc. v. Belleville (City) (Re), [2014] O.A.R.B.D. No. 489 (“151516 Canada Inc.”), the Board found that there were grounds to cancel, reduce or refund the taxes following the demolition and reconstruction of a property, but did not make an order for relief. The Board found that the taxpayer failed to meet its onus to introduce sufficient evidence and explain sufficiently how it calculated its proposed tax adjustment. The Board was not persuaded that a method of calculating a refund which treated the vacant portion of the property as though it was completely exempt from taxation was intended under the subsection (151516 Canada Inc. at paras 22 and 23).
70The Board finds that evidence of the cost to cure advanced by CREIT is the best approach to calculating the quantum of the relief for the period of June 1, 2014 – December 31, 2014. CREIT’s proposal is that the amount of the refund be based on the reduction in the value of the space, which in this case was determined by MPAC in to be $4,219,000 (the cost to cure) for the relevant period of time. Mr. Minster submits that this is the very same remedy – conversion to a vacant tax rate together with an assessment reduction and a corresponding refund – that was applied by MPAC to the property for the 2015 taxation year. The settlement reflects the value of the structure while undergoing demolition and reconstruction. CREIT’s calculations also take into account the effect of the phase-in of the assessment on the 2014 taxation year current value.
71Based upon the reduction to the assessment of $4,219,00 (rounded and phased-in for 2014), and the tax rate for Mississauga for 2014, CREIT calculates a refund of $49,744.17, before taking into account the adjustment of the previously granted vacancy rebate, as follows:
Post s. 40 settlement values for subject property:
2012 CVA$ Phase-In 2013$ Phase-In 2014$ Phase-In 2015$ Phase-In 2016$
15,429,650 14,489,563 14,802,925 15,116,288 15,429.650
Post settlement and post demolition values for subject property:
2012 CVA$ Phase-In 2013$ Phase-In 2014$ Phase-In 2015$ Phase-In 2016$
11,210,650 10,543,173 10,765,665 10,988,158 11,210,650
June 1, 2014 – December 31, 2014 (214 days) = 58.53% of year
2014 Phase-in $: 4,037,250
2014 CT Tax Rate: 2.101525%
Annual Tax Refund $: 84,844.03
Pro-rated Tax Refund $: 49,744.17
72The Board received no submissions from the City regarding the quantum for relief, except in the closing remarks of Mr. O’Kane, that quantum be pro-rated to include the demolition period exclusively. The City did not raise an issue with regard to the accuracy of the taxpayers’ calculations. The Board understands from the submissions of counsel that the required recalculation under s. 4.(1) of O. Reg. 325/01 of the amount of the rebate in respect of an eligible property adjustment to be made for the vacancy, should the taxpayer’s appeal succeed, is an administrative matter to be resolved between the parties that should not be in issue.
73The Board accepts the methodology and quantum proposed by CREIT as it accounts for the mid-year change in value by pro-rating the cost to cure approach taken by MPAC when it returned the value for 2015.
CONCLUSION
74The appeal is allowed. The Assessment Act and the Municipal Act, 2001 form a complete code for property assessment and taxation, which include provisions by which the taxpayer can appeal the assessment or seek property tax relief. The Board finds that a selective or partial demolition was undertaken at the subject property; that this demolition comes within the ambit of “damage by demolition” which rendered it substantially unusable for the purposes for which it was used immediately prior for the period of June 1, 2014 – December 31, 2014, namely a commercial leasable property. The Board finds ample authority and evidence in support of CREIT’s position that it is entitled to relief for damage by demolition under s. 357(1)(d)(ii) contemporaneous with the relief granted under s. 364 (subject to recalculation under s. 4.(1) of O. Reg. 325/01).
75The Board orders a refund of taxes for the subject property in the amount of $49,744.17.
“J. L. Walker”
J. L. WALKER
MEMBER
Assessment Review Board
A constituent tribunal of Environment and Land Tribunals Ontario
Website: www.elto.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248
Appendix A
Municipal Act, 2001 S.O. 2001, Chapter 25
Adjustments to roll
- (1) The treasurer shall adjust the tax roll for a year to reflect changes to the assessment roll for that year made under the Assessment Act after the tax roll is prepared. 2001, c. 25, s. 341 (1).
Consequences of adjustments
(2) Taxes for the year shall be collected in accordance with the adjusted tax roll as if the adjustments had formed part of the original tax roll and the local municipality,
(a) shall refund any overpayment; or
(b) shall send another tax bill to raise the amount of any underpayment. 2001, c. 25, s. 341 (2).
Cancellation, reduction, refund of taxes
- (1) 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,…
(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;
(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. 2001, c. 25, s. 357 (1); 2002, c. 17, Sched. A, s. 62; 2002, c. 22, s. 158.
Exception, vacant unit rebate
(1.1) 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. 2007, c. 7, Sch. 26, s. 6.
Appeal
(7) 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. 2001, c. 25, s. 357 (7).
Appeal
(15) A decision of council under subsection (13) may be appealed to the Assessment Review Board and subsections (6), (7), (9) and (10) apply with necessary modifications to the appeal. 2001, c. 25, s. 357 (15).
Decision final
(17) A decision of the Assessment Review Board is final. 2001, c. 25, s. 357 (17).
Vacant unit rebate
- (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). 2001, c. 25, s. 364 (1).
Ontario Regulation (“O. Reg.”) 325/01, made pursuant to s. 364(11) of the Act
Eligible property
- (1) A building or structure on property that is classified in one of the commercial classes or industrial classes or in the landfill property class 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. O. Reg. 325/01, s. 1 (1); O. Reg. 300/03, s. 2 (1); O. Reg. 97/17, s. 2 (1).
(2) A portion of a building on property that is classified in one of the commercial classes or in the landfill property class 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. O. Reg. 325/01, s. 1 (2); O. Reg. 300/03, s. 2 (2); O. Reg. 97/17, s. 2 (2)....
(4) The following rules apply for the purposes of subsections (1), (2) and (3):
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.
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. O. Reg. 325/01, s. 1 (4).
(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, industrial or landfilling activities 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. O. Reg. 325/01, s. 1 (5); O. Reg. 300/03, s. 2 (4); O. Reg. 97/17, s. 2 (3)….
Amount of rebate
- (1) In this section,
“base property” means, in respect of an eligible property for a taxation year, the real property whose assessment on the roll returned under the Assessment Act for taxation in the taxation year includes the eligible property, excluding any portion of the real property,
(a) that is exempt from taxes for municipal and school purposes for the year,
(b) that is not included in the same class of real property for the taxation year under the Assessment Act as the eligible property, or
(c) that is included in a subclass for excess land under subsection 8 (1) of the Assessment Act. O. Reg. 325/01, s. 2 (1)….
(2) The amount of taxes for a taxation year in respect of an eligible property to which the percentage specified in paragraph 2 or 3 of subsection 364 (2) of the Act, set out in subsection (1.1) of this section or referred to in subsection 364 (4) of the Act is to be applied is determined as follows:
Take the value of the eligible property for the year as determined by the assessment corporation.
Determine the percentage that the value of the eligible property is of the assessed value of the base property for the taxation year.
Multiply the percentage determined under paragraph 2 by the taxes for municipal and school purposes for the base property for the taxation year.
Determine the percentage that the number of days in the taxation year that the property was an eligible property is of the total number of days in the year.
Multiply the percentage determined under paragraph 4 by the product determined under paragraph 3. O. Reg. 325/01, s. 2 (2); O. Reg. 300/03, s. 3 (1); O. Reg. 97/17, s. 3 (2)….
Application for rebate
(1) An interim application and a final application for a rebate under section 364 of the Act in respect of a taxation year must contain the following information:
The name of the owner of the eligible property and, if applicable, the name of the owner’s agent.
The address of the real property that includes the eligible property, including the number, street and municipality.
The assessment roll number of the real property that includes the eligible property for purposes of assessment under the Assessment Act.
The dates in the period covered by the interim or final application during which the building or structure or the portion of the building was an eligible property.
A description of the eligible property,
i. by suite or unit number and floor number, or
ii. by a method of describing its location in the building that is sufficient to identify the eligible property if it cannot be described by suite or unit number and floor number.
The area of the eligible property in square feet.
Any additional documentation the municipality or assessment corporation may request to assist in identifying the eligible property. O. Reg. 325/01, s. 3 (1); O. Reg. 300/03, s. 4.
(2) The municipality shall forward a copy of each interim and final application to the assessment corporation for determination of the value of the eligible property. O. Reg. 325/01, s. 3 (2).
(3) The assessment corporation shall provide the value of the eligible property to the municipality as soon as practicable. O. Reg. 325/01, s. 3 (3).
(4) The municipality shall calculate the amount of the rebate payable to the owner as soon as practicable after receiving the determination of the value of the eligible property from the assessment corporation. O. Reg. 325/01, s. 3 (4).
(5) The municipality may calculate the amount of a rebate based on an estimate of the amount of taxes for municipal and school purposes in respect of the eligible property and subsequently adjust the amount of the rebate when the amount of the taxes is finally determined. O. Reg. 325/01, s. 3 (5).
Recalculation of rebate
- (1) The municipality shall recalculate the amount of a rebate in respect of an eligible property if the taxes are reduced under section 357 or 358 of the Act or if the assessment for the property changes as the result of,
(a) a settlement under section 39.1 of the Assessment Act;
(b) an appeal under section 40 of the Assessment Act; or
(c) an application under section 46 of the Assessment Act. O. Reg. 325/01, s. 4 (1); O. Reg. 300/03, s. 5.
(2) If a municipality pays or credits to an owner a rebate in an amount that is greater than the amount determined under a recalculation under subsection (1), the municipality may recover the excess amount. O. Reg. 325/01, s. 4 (2).
(3) If a municipality pays or credit to an owner a rebate in an amount that is less than the amount determined under a recalculation under subsection (1), the municipality shall pay or credit to the owner the additional amount of the rebate as soon as practicable after the recalculation. O. Reg. 325/01, s. 4 (3)
Building Code Act, 1992, S.O. 1992 c. 23
Definitions
1(1) In this Act,
“building code” means regulations made under section 34;…
“construct” means to do anything in the erection, installation, extension or material alteration or repair of a building and includes the installation of a building unit fabricated or removed from elsewhere and “construction” has a corresponding meaning;…
“demolish” means to do anything in the removal of a building or any material part thereof and “demolition” has a corresponding meaning;
35 (1) This Act and the building code supersede all municipal bylaws respecting the construction or demolition of buildings. 1992, c. 23, s. 35(1).