Dr. Christopher Morris Dentistry Professional Corp. v. Municipal Property Assessment Corporation, 2018 CanLII 126633

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: December 31, 2018

FILE NO.: ID 154743

Assessed Person(s): Dr. Christopher Morris Dentistry Professional Corp.

Appellant(s): Dr. Christopher Morris Dentistry Professional Corp.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): Town of Milton

Property Location(s): 995 Thompson Road South

Municipality(ies): Town of Milton

Roll Number(s): 2409-090-100-09200-0000

Appeal Number(s): 3108240 and 3166856

Taxation Year(s): 2014 and 2015

Hearing Event No.: 693464

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

Heard: March 5, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Dr. Christopher Morris Dentistry Professional Corp.

Otila Carpinisan

Town of Milton

Steven Radenic

INTERIM DECISION OF THE BOARD DELIVERED BY CAROLINE KING

INTRODUCTION

1This is a complaint from Dr. Christopher Morris Dentistry Professional Corp. (the “Complainant”) regarding applications denied by the Town of Milton (the “Town”) for a vacancy rebate for the 2014 and 2015 tax years. The property is located at the municipal address of 995 Thompson Road South in Milton and is in the commercial property class. For the time period relevant to this complaint, the building contained dental chairs and equipment which were fixed to the building ready for use by dentists or other oral-care professionals. The building also contained space appropriate for a professional spa. The parties agree that the property was sold in 2015.

2The parties disagree about whether the building was vacant and whether the Complainant’s evidence was sufficient and satisfied the Town’s evidentiary requirements.

3To be eligible for this vacant unit rebate under section 364 of the Municipal Act 2001 S.O. 2001 c.25 (the “Act”) the property must be eligible under section 1 of Ontario Regulation 325/01 (“O. Reg. 325/01”) which requires that the property must be vacant for a period of at least 90 consecutive days, and that no portion of the building was used during the vacancy period. Further, for properties in the commercial class such as this one, the portion of the building that was vacant must be capable of being leased for immediate occupation.

4For the reasons provided below, the Assessment Review Board (the “Board”) finds that the property was vacant for the 2014 and 2015 taxation years (up to the date of sale).

LEGISLATION

5The Board must have regard to s. 364 of the Act and O. Reg. 325/01 when determining whether or not a vacant unit rebate is justified.

6Section 364.(1) of the Act outlines the nature of the vacant unit rebate as follows:

364.(1) Vacant unit rebate. - Every local municipality shall have a rogram 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).

7Section 364.(5) of the Act stipulates that evidentiary requirements for the program may be required by the local municipality:

(5) Evidentiary requirements. - The program may include evidentiary requirements that must be satisfied for the owner to be entitled to a rebate under this section.

8Sections 364.(8) and 364.(9) of the Act outline the nature of providing for and the receipt of proper information in order to implement the program:

(8) Request for information. - For the purposes of determining the proper amount of any rebate payable under this section, the municipality may, by letter sent by mail, served personally or delivered by courier, require the owner or manager of a property referred to in an application under this section to provide any relevant information or produce any relevant records within such reasonable time as is set out in the letter.

(9) Return of information. - A person who receives a letter under subsection (8) shall, within the time set out in the letter, provide to the municipality all the information that is within the person’s knowledge and produce all of the records required that are within the person’s possession or control.

(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.

(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.

9O. Reg. 325/01 states:

(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.

(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.

10Section 3.(1) of O. Reg. 325/01 mandates the following information that must be included in an application for a vacant unit rebate:

3.(1) Application for rebate. – 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:

1. The name of the owner of the eligible property and, if applicable, the name of the owner's agent.

2. The address of the real property that includes the eligible property, including the number, street and municipality.

3. The assessment roll number of the real property that includes the eligible property for purposes of assessment under the Assessment Act.

4. 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.

5. 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.

6. The area of the eligible property in square feet.

7. Any additional documentation the municipality or assessment corporation may request to assist in identifying the eligible property.

EVIDENCE

Documentary Evidence

11Dr. Christopher Morris of the Complainant Corporation gave evidence, and Brandi Schiele, Assessment Specialist for the Town of Milton, gave evidence. To provide the context for the oral testimony, a chronological summary of the documentary evidence submitted to the Board is set out below:

• 2013: A 2013 RE/MAX Sales listing for the property which includes the following description:

Well established Dental Clinic and Spa… Great Opportunity for Dentists and Builders !!! Fully Established Dental Clinic With 2 Dental Chairs And All Other Dental Equipment on the Main Floor And Fully Equipped Spa in the Lower Level.

• April 25, 2014: A purchase and sale agreement dated April 25, 2014 between the Complainant as seller and a buyer (Initials A.K.) in trust, which was to be completed July 15, 2014. The chattels included in the purchase and sale agreement included “all fixed dental and spa equipment.” The agreement was signed by the Complainant on May 30, 2014. It was not disputed that this purchase and sale agreement was not completed. The listing brokerage was RE/MAX Real Estate Centre Inc.

• June 9, 2014: Letter dated June 9, 2014 to the Complainant from Parveen Arora, Broker/Team Leader and George R. Burns Broker/Manager RE/MAX Real Estate Centre Inc. The letter confirmed that if the buyer did not complete the sale transaction, the Complainant would not be required to pay the Real Estate Broker any commission.

• September 21, 2014: A purchase and sale agreement dated September 21, 2014 between the Complainant as seller and Adam Mohammed as purchaser, which was revocable by the buyer until September 21, 2014 and completed on November 21, 2014. The chattels included in the purchase and sale agreement included “all dental chairs and all other dental equipment” as well as the spa equipment. This purchase and sale agreement is signed by the Complainant on September 21, 2014. The listing brokerage was RE/MAX Real Estate Centre Inc.

• February 23, 2015: Application for a Rebate of 2014 Property Taxes. Letter attached to application states:

This letter is to confirm that no part of the entire building was ever tenanted or used during the 2014 tax year from Jan 1 2014 to December 31, 2014. [sic]

Although there was some discussion with colleagues to use the space there was no official advertising for the leasing of the space as it was the intent of the owners to either occupy the space themselves or to convert the property back to residential use. [sic]

• March 19, 2015: Town of Milton’s denial of Complainant’s Application for a Rebate of 2014 Property Taxes. Letter states:

It is the Town’s opinion that, as a basis for confirming vacancy, proof of actively advertising available space for lease is unavailable.

Secondly, when reviewing the photographs taken by the Municipal Property Assessment Corporation it was noted that rooms were equipped with desks, table, chairs and not clear of office materials. It is the Town’s interpretation that a vacant space should be empty of all furniture and equipment.

• July 10, 2015: Complainant’s affidavit dated July 10, 2015 which states:

[…that the property was not]…occupied or used for any business or occupied for any purpose from January 1, 2014 to this date of July 9, 2015.

During the early part of the spring of 2014, 3 to 4 real estate agents were contacted and asked to look for a purchaser…

A purchaser was found by one of the real estate agents and a purchase and sale agreement was signed on Oct 27 2014. [sic]

It was not possible to lease the property… during this period of searching for a purchaser as a lease may not be desirable to a perspective purchaser.

• July 30, 2015: Letter dated July 30, 2015 from Stephen A. Holmes Professional Corporation to the Complainant confirming the sale of the property to a Mr. Mohammed (and a numbered Ontario corporation) with a closing date of July 30, 2015.

• February 27, 2016: Application for a Rebate of 2015 Property Taxes. Affidavit attached to application addresses that the Affidavit is in lieu of documentation such as an Multiple Listing Service (MLS^®) listing and states:

[The property] was advertised by word of mouth within and through the medical community known to me in my capacity as a dentist

• March 24, 2016: Town of Milton’s denial of Complainant’s Application for a Rebate of 2014 Property Taxes. Letter states:

The Town of Milton has reviewed the above application and concluded that it does not meet the requirements of the program for the following reason(s):

o Insufficient documentary evidence to confirm the period of vacancy

o The reasons identifying the proposed vacant space could not be substantiated.

Complainant’s Evidence and Position

12Dr. Christopher Morris of the Complainant Corporation (“Complainant Witness”) gave evidence that he owns the Complainant Corporation. The Complainant Witness stated the property was a commercial space for a dentistry practice and with additional space for a spa.

13The Complainant Witness stated that he never opened up a dentistry business at the property, and his wife never opened up the spa at the property as she went back to school. He stated that he listed the property with a real estate company, and ultimately sold it in the fall of 2014 to Mr. Mohammed with a closing date in July 2015. He stated that it took a long time to close the sale. When asked for additional proof that the Complainant did not use the property at any time in 2014 or 2015, the Complainant Witness answered that he operated his dentistry business out of his office locations in Barrie and Brampton.

14He stated that the property was set up for a dentistry practice and that therefore the dentistry chairs and the x-ray equipment was fixed into the property for sale (as indicated in the two purchase and sale agreements submitted to the Board). The dentistry chairs were wired in and fixed to the building. There were no dentistry hand tools at the property in 2014 or 2015. Any phone calls to the phone number listed on the signage were forwarded to his other office locations in Barrie and Brampton.

15The Complainant Witness stated that since he was selling the property, he didn’t want to lease it as it might interfere with a potential sale.

16The Complainant Witness stated that the property was not used for storage, the dentistry chairs etc. were fixed to the building and were a selling feature for prospective dentistry practices.

17It was the Complainant’s position that it was entitled to the vacancy rebate as the property was not occupied or used in the 2014 and 2015 tax years (up to the date of sale). Further, the property was not listed for leasing as the Complainant was trying to sell the property as corroborated by the multiple documents relating to efforts to sell the property and that the Complainant was not storing the equipment in the property, rather the dental chairs and equipment fixed into the property was a part of trying the sell the property for a dentistry practice.

Town’s Evidence and Position

18Brandi Schiele, Assessment Specialist for the Town of Milton (the “Town’s Witness”), gave evidence. She stated that the Town was trying to establish the timelines of any vacancy. She stated that for the 2014 application there was still equipment in the building and that it was the Town’s position that if the space was used for storing the equipment it didn’t qualify for a vacancy rebate. It was her position that there was no way to determine if the building was being used in 2014 and 2015.

19The Town’s Witness acknowledged the affidavits submitted by the Complainant and stated that the purpose of the affidavit for a vacancy application “…was if there was no other way to confirm vacancy.”

20The Town’s position was that the Complainant’s evidence was insufficient, and apart from the purchase and sale agreements there was no other “real evidence.” The Town noted that the second purchase and sale agreement submitted into evidence was not complete as it did not show the terms of the final agreement. The Town reviewed the requirements set out in section 364 of the Act and commented that it was not satisfied that the property was capable of being leased.

ANALYSIS

Was the property being used for storage?

21The Town submitted that the property was being used for storage as the dental chairs and equipment was in the building in 2014 and 2015. The Complainant Witness argued that the dental equipment was fixed, wired to the building and that it was not using the building as storage.

22I find that it is more likely than not that the building was not being used as storage. The presence of fixtures, such as dentistry chairs/equipment and/or spa equipment hard wired and plumbed into the building for the purpose of selling the building to a dentistry practitioner, is distinct from selling an office with movable furniture such as tables and chairs. Further the details of the 2013 RE/MAX sales listing and the two purchase and sale agreements indicate that the dental equipment was included in the sale.

Was the building on the property vacant for at least 90 days and not used at any time for the period of vacancy claimed?

23The evidence that the property was vacant for a period longer than 90 days and not used at any period in 2014 and up to July 30, 2015 consists of:

• the Complainant Witness’ testimony; and

• the following documentary evidence : an April 25, 2014 purchase and sale agreement; a September 21, 2014 purchase and sale agreement, a letter dated February 23, 2015 (attached to the 2014 application) confirming that the property was never used or tenanted in 2014; a July 2015 affidavit stating that the property was not used for any purpose from January 1, 2014 to July 9, 2015 and that “…it was not possible to lease the property” as the Complainant wanted to sell it; and a letter dated July 30, 2015 confirming the sale of the property to Mr. Mohammed with a closing date of July 30, 2015.

24The 2013 RE/MAX sales listing supports the Complainant Witness’s testimony that the Complainant’s intention was to sell the property. The ongoing relationship between the Complainant and RE/MAX including the sales listing, the two purchase and sale agreements in 2014, and the June 9, 2014 letter is persuasive that there was an ongoing effort to sell the property. This is in addition to the July 30, 2015 letter to the Complainant confirming that the property had been sold. When I consider the corroborating documentary evidence that the Complainant was trying to sell the property, I find that it is more likely than not that tenanting or leasing out the property could have, from the Complainant’s perspective, interfered with a potential sale.

25When I consider the Complainant’s evidence that the property was not used in any period from January 1, 2014 to July 30, 2015 and the supporting corroborating documentary evidence relating to the efforts to sell and the eventual sale of the property, and the fact that the uncontested evidence of the Complainant that he was running his business out of his offices in Barrie and Brampton, I find that it is more likely than not that the building was not used at any time from January 1, 2014 up to and including July 30, 2015. Running a dentistry business requires not just dental chairs and x-ray machines, but also a large number of expensive hand tools and oral-care materials associated with running a dentistry business. I find it implausible that the Complainant was episodically practicing dentistry from this property, especially in light of the two purchase and sale agreements which are persuasive that he was not going to set up his dental practice in Milton.

Was the building capable of being leased for immediate occupation?

26I find that it is more likely than not that the building was capable of being leased for immediate occupation, especially to a dentistry practitioner and/or a spa provider. I have found that the building was not occupied and was vacant from January 1, 2014 to July 30, 2015 at which time ownership of the building was passed over to the purchaser. There were no physical or legal restrictions on the building being leased for immediate occupation.

27The fact that it was not leased was due to a business decision of the Complainant that the building and property were for up for sale and that leasing the building could have a negative impact on selling it.

28The presence of established fixed assets such as dental chairs or spa equipment does not interfere with the building being capable of being leased. Indeed the presence of such fixed business assets could be an asset for dentistry practitioners.

29The Town’s 2014 Application for Rebate of Property Taxes did not set out any evidentiary requirement that proof of advertising the building for lease was required. The Town’s March 19, 2015 letter rejecting the Complainant’s application states:

It is the Town’s opinion that, as a basis for confirming vacancy, proof of actively advertising available space for lease, is unavailable.

30This letter does not state that such proof is mandatory, rather that the proof of advertising the building for lease is a basis for confirming vacancy and that in this case it is not available. It was not available because the Complainant was making efforts to sell the property and elected not to lease the property.

31The Town’s 2015 Application for Rebate of Property Taxes is a more detailed document. In Section 3 of that document, it contemplates that the property might be up for sale (rather than for lease), and in such a case, a purchase agreement be provided. The final purchase agreement was not provided in this case (for reasons unknown to the Board), however, the two purchase and sale agreements and the letter dated July 30, 2015 confirming the closing details of the sale of the property to Mr. Mohammed were provided. I find that these documents together with the Complainant’s July 10, 2015 affidavit confirming the vacancy, satisfy any evidentiary requirements of the Town, especially in light of the witness for the Town’s evidence that the purpose of an affidavit for the application was for when “there was no other way to confirm vacancy.”

32The choice of not electing to lease the space does not invalidate the fact that the property was capable of being leased for immediate occupation. This interpretation is consistent with the fact that Milton’s Vacancy Rebate Application provides for an option for a purchase and sale agreement.

33In consideration of this testimony, and the time periods covered in these documents, and the July 30, 2015 letter confirming the closing details of the sale, supported by the Complainant’s affidavit, I find that the Complainant has provided sufficient evidence to establish that it is more likely than not that the building was capable of being leased for immediate occupation for the period January 1, 2014 to July 30, 2015.

34I reviewed the case law submitted to me. I did not consider any cases dealing with self-storage facilities as the nature and issues arising out of self-storage facilities are very different from the case here, where the entire building was vacant. This case also considers the impact of fixed assets (dental/spa equipment) on whether the building was capable of being leased for immediate occupation.

35The Town of Milton’s evidentiary requirements for rebate applications appear to be different from the City of Markham’s considered in WR 127741, 1602978 Ontario Inc. v. Markham (City), 2015 CanLII 32541 (ON ARB).

36I agree with the Board’s decision in WR 119334 Manheim Auto Auctions Ltd. v. Municipal Property Assessment Corp., Region No. 15, [2013] O.A.R.B.D. No. 178, 78 O.M.B.R. 236, 2013 CarswellOnt 12584 where the Board stated in part:

It is quite reasonable for a municipality to insist on some form of verification, beyond simply accepting the word of the applicant.

37However, this case is distinguishable in two important ways from WR 119334. First, in that case the office space that was not contained in a separate area. In that case, the vacant office area included space where a potential lessee’s employees would be intermingled with the applicant’s employees and the Board found the space was not appropriate to lease. In this case, the entire building was vacant and available to lease and was ultimately sold. The Board finds it more likely than not that the building was capable of being leased during the period January 1, 2014 up to and including July 30, 2015. Second, in this case, the Board finds that the Complainant’s evidence, including the corroborating documentary evidence, was persuasive and sufficient to establish that the building was vacant for the period January 1, 2014 up to and including July 30, 2015.

INTERIM DECISION

38The Complainant’s application for a 2014 vacancy rebate for the building is granted for the period from January 1, 2014 to December 31, 2014.

The Complainant’s application for a 2015 vacancy rebate for the building is granted for the period from January 1, 2015 to July 30, 2015.

39The parties are directed to make written submissions to the Board regarding the amount of vacant unit rent rebate payable for:

a. January 1, 2014 to December 31, 2014; and

b. January 1, 2015 to July 30, 2015.

40The submissions shall be made to the Board within 60 days of the release of this interim decision.

41Upon receipt of the written submissions, the Board will render a final decision, or will reconvene the hearing if necessary to make its decision.