Queen St. Patrick Market Inc. v. City of Toronto, 2018 CanLII 116159

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: November 29, 2018

FILE NO.: WR 148642

Assessed Person: City of Toronto

Complainant: Queen St. Patrick Market Inc.

Respondent: City of Toronto

Property Location: 238 Queen Street West

Municipality: City of Toronto

Roll Number: 1904-065-070-00100-0000

Complaint Numbers: 3165577, 3165578, 3165579, 3165580, 3165581, 3165582, 3195873

Taxation Years: 2008, 2009, 2010, 2011, 2012, 2013 and 2014

Hearing Event No.: 679164

Legislative Authority: Section 331.(14) of the City of Toronto Act, 2006, S.O. 2006 c.11, Sched. A

Heard: September 19, 2017 in Toronto, Ontario

APPEARANCES:

Parties	Counsel
Queen St. Patrick Market Inc.	Joel Farber
City of Toronto	Angus MacKay

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT AND CAROLINE KING

INTRODUCTION

1This decision considers complaints from Queen St. Patrick Market Inc. (the “Complainant”) regarding applications denied by the City of Toronto (the “City”) for a vacant unit rebate for the 2008 through 2014 tax years. The subject complaints apply to the property located at 238 Queen Street West (“subject property”). The parties agree that the sole issue in this dispute is eligibility.

2To be eligible to receive a vacant unit rebate, section 331 of the City of Toronto Act, 2006 S.O. 2006 c.11, Sched. A (the “Act”) provides that the Complainant must be an owner, and the property must be an eligible property. If either of these two eligibility grounds are not met, there is no entitlement for a vacant unit rebate. In this case, the parties disagree about whether the Complainant is an owner within the meaning of section 331 of the Act. The parties also disagree about whether the property is an eligible property.

3For the reasons provided below, the Assessment Review Board (the “Board”) finds that the Complainant is not an owner within the meaning of section 331 of the Act and therefore is not entitled to a vacant unit rebate. Even if the Board did find that the Complainant was an owner within the meaning of section 331 of the Act, the Complainant would not be entitled to the vacant unit rebate because the property is not an eligible property. This is because of the leasehold interest the Complainant holds in the building located on the subject property for the time period material to this complaint.

BACKGROUND

4The subject property was bequeathed to the City in the 19th century. The building has a first floor of 6,000 square feet with a full basement measuring 4,800 square feet.

5In 1989, the City leased the building located on the subject property to the Complainant in a 50 year net lease agreement in which the Complainant assumed responsibility for the building reconstruction, ongoing maintenance, and sub-leasing. The lease permits the Complainant to sub-lease the premises for food-related purposes, a condition of the original bequest.

6It is the City’s position that the Complainant is the lessee (tenant) and not the owner of the building on the subject property and therefore is not eligible to receive the vacant unit rebate. The City further argues that the subject property is not an eligible property as it is leased to the Complainant who holds the leasehold interest.

7The Complainant concedes that it is a tenant and not the actual owner of the building on the subject property. The Complainant’s position is that it is the de facto owner by virtue of the extensive rights and obligations conferred by the 50 year lease agreement, including typical owner responsibilities. It is the Complainant’s position that the subject property is an eligible property.

THE LAW

8Section 331(1) of the Act sets out “The City shall have a program to provide tax rebates to owners of property...” [Emphasis added].

9Section 331(5) of the Act sets out that the City may establish evidentiary requirements for an owner to be entitled to a vacant unit rebate. [Emphasis added].

10Section 38(5)(b) of Ontario Regulation 121/07 (the “Regulation”) excludes property that “is leased to a tenant who is in possession of the leasehold interest” for the time period under consideration.

UNCONTESTED FACTS

11George Friedmann, president and principal of the Complainant corporation, gave evidence and did not dispute the following facts in his testimony:

• The City owns the subject property including the building. The terms of the bequest of the subject property to the City restricts the City’s ability to sell it.

• The City leased the building to the Complainant in a 50 year net lease agreement dated June 15, 1989. The building alone is leased to the Complainant, it is not a ground lease.

• The Complainant is technically a tenant who holds the leasehold interest in the building. The Complainant has the right to sublet the building.

• The Complainant is responsible for the cost of repairs, renovations, and reconstruction of the building. Extensive work and reconstruction of the subject building were required when the lease was entered into. The Complainant advised that these costs totaled $1,800,000. The Complainant was subsequently able to deduct the restoration costs over a 10 year period from the money payable to the City. The Complainant is responsible for all ongoing repairs, maintenance and management, including collection of rent.

ANALYSIS

Eligibility Ground 1 – Is the Complainant an owner of the building?

12The Complainant argues it should be found to be the owner of the building because the City bears no responsibility for it, and because “[the Complainant] bears all the indicia of ownership” including the obligation for reconstruction, repairs, and upkeep of the building as well as a lengthy lease term.

13The cases submitted by the Complainant, including Armel Corp. v. Guelph (City), [2011] O.A.R.B.D. No. 388 (“Armel”) and Nortel Networks Technology Corp. v. Ottawa (City), 2010 CarswellOnt 9240 (“Nortel”), are distinguishable on the facts of this case. In Armel, the complainant owned the mini-warehouse or self-storage facility. In Nortel, the complainant owned the buildings. In this case, the City is the owner of the building. Further, the City did not have the right to sell the subject property to the Complainant due to the terms of the original bequest to the City and therefore could not confer on the Complainant all of the rights of ownership.

14The Complainant argued that the Act should be interpreted liberally. Specifically the meaning of the word “owner” in section 331 of the Act should be interpreted broadly so that the Complainant is determined to be an “owner” by virtue of its extensive property rights (including length of term), and obligations (reconstruction, repairs, maintenance).

15The Board does not agree with the Complainant’s arguments. In Ludco Enterprises Ltd. v. Canada, 2001 SCC 62, the Supreme Court of Canada cited with approval the modern rule of statutory interpretation set out by E.A. Driedger in Construction of Statutes (2nd ed. 1983), at p. 87:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament…

16Unlike other sections of the Act, such as section 323 (cancellation, reduction, or refund of taxes) which specifically uses the words “owner” as well as “tenant” in relief provisions, section 331 only uses the word “owner”. In this legislative context, to interpret the word “owner” in section 331 broadly in a way that includes those who do not have ownership, would be to read-in a meaning that is not consistent with the ordinary sense of the term “owner”. It would not be harmonious with the scheme of the Act which in other provisions specially grants relief provisions to not just owners but also to tenants. If the legislature intended for the relief in section 331 to be available to others including tenants, the Board finds it would have said so.

17Further, as argued by the City, to interpret the word “owner” in section 331 to include the Complainant as the lessee with the leasehold interest in the building, would be inconsistent with section 38(5)(b) of the Regulation which specifically excludes “[a building… that] is leased to a tenant who is in possession of the leasehold interest throughout the period of time”. Such an interpretation would render section 38(5)(b) of the Regulation meaningless. Put another way, to interpret the word “owner” in section 331 to include a tenant with leasehold interest in the property, would produce an absurd result. Such an interpretation would create an illusory expansion of rights to certain persons (such as tenants) with leasehold interests in property that is explicitly excluded from the vacant unit scheme because of section 38(5)(b) of the Regulation. This cannot have been the legislative intent.

18The Board finds that the Complainant is not an owner within the meaning of section 331 of the Act.

Eligibility Ground 2 – Is the subject property an eligible property?

19The subject property is not an eligible property because the lease agreement between the Complainant and the City clearly indicates that the Complainant leases the building on the subject property, is the tenant, and is in possession of the leasehold interest during the time covered by the seven applications made.

20The Board therefore finds that the subject property is not an eligible property under the s. 38(5)(b) of the Regulation.

DECISION

21The Board finds that the Complainant is not an owner within the meaning of section 331 of the Act, and therefore the Complainant is not entitled to a vacant unit rebate.

22The Board also finds the subject property is not an eligible property by operation of section 38(5)(b) of the Regulation because the Complainant holds the leasehold interest in the building on the subject property. The Complainant is not entitled to a vacant unit rebate.

23Accordingly, the complaints made by Queen St. Patrick Market Inc. under section 331.(14) of the Act for the 2008 through 2014 taxation years are dismissed.