Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

December 11, 2023

FILE NO.:

WR 185597

Assessed Person(s):

1258881 Ontario Inc

Appellant(s):

123 Metcalfe Properties GP Inc.

Respondent(s):

Municipal Property Assessment Corporation Region 03

Respondent(s):

City of Ottawa

Property Location(s):

123 Metcalfe Street

Municipality(ies):

City of Ottawa

Roll Number(s):

0614-041-801-26300-0000

Appeal Number(s):

3509572

Taxation Year(s):

2021

Hearing Event No.:

781969

Legislative Authority:

Section 357.(7) of the Municipal Act, 2001, S.O. 2001, c. 25

APPEARANCES:

Parties

Representative

1258881 Ontario Inc

No one appeared

123 Metcalfe Properties GP Inc.

Glenn Lucas

City of Ottawa

Shen Bai

HEARD:

October 16, 2023 by telephone conference call

ADJUDICATOR(S):

Christopher Voutsinas, Vice-Chair

DECISION

OVERVIEW

1123 Metcalfe Properties GP Inc. (“Appellant”) owns the property located at 123 Metcalfe Street (“Subject Property”) in the City of Ottawa (“Municipality”). On February 22, 2022, the Appellant filed with the Municipality a s. 357 application in accordance with the Municipal Act, 2001, S.O. 2001, c. 25 (“Act”). On January 17, 2023, the Municipality denied the application. As a result, on January 24, 2023, the Appellant filed an appeal with the Assessment Review Board (“Board”).

2At the conclusion of the hearing, the Board rendered an interim oral decision and directed the parties to provide the Board within 30 days their respective calculation in connection with tax relief pursuant to s. 357 of the Act. Upon review of the parties’ submissions, the Board would render a final decision. This decision is that final decision.

Background

3The Subject Property was purchased by the Appellant in June 2021 as part of a portfolio of hotel properties in the Ottawa area. According to the Appellant, it was in a poor state of repair and required significant updating.

4All floors of the Subject Property were fully closed for a period of one year from August 1, 2021 – August 1, 2022.

5Some of the early work conducted by the Appellant at the Subject Property did not require a permit including removal and upgrading of the Fire Panel and related system.

6A permit was taken out after demolition was underway and structural repairs were required.

7Pursuant to s. 357 of the Act, the Appellant is seeking a refund of approximately $187,282 for the 2021 and 2022 taxation years for the time the Subject Property was under renovation and repair that prevented the normal use of the property.

8At the hearing, the Municipality asserted that it did not have sufficient information to make a determination with regard to the applicability of s. 357.

Issues for the Hearing

9At issue in this proceeding is:

1. Does the Subject Property meet the requirements of s. 357 of the Act for the 2021 and 2022 taxation years?

2. If so, then what is the quantum of the reduction in property taxes in each of the referenced taxation years?

Result

10In connection with Issue 1, the Board rendered an interim oral decision at the conclusion of the hearing confirming that the Subject Property meets the requirements of s. 357 for the 2021 taxation year and that no application was made by the Appellant for the 2022 taxation year. As such, there is no 2022 appeal before the Board – consistent with the Board’s hearing docket in this matter.

11As such, this final decision addresses Issue 2 only where the Board orders that the Appellant receive a tax refund in the amount of $39,223 for the 2021 taxation year.

ANALYSIS

Description of Subject Property

12The Subject Property is a limited-service hotel located at the intersection of Metcalfe Street and Laurier Avenue West in the City of Ottawa. The Municipal Property Assessment Corporation (“MPAC”) has the property coded as Property Code 445 – limited service hotel.

Relevant Legislation

13The relevant provisions of s. 357 state the following:

Cancellation, reduction, refund of taxes

357 (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.

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.

Decision

(10) The Assessment Review Board shall hear the appeal and may make any decision that council could have made.

Issue 2: What is the quantum of the reduction in property taxes for the 2021 taxation year?

14Having found that the Subject Property meets the requirements of s. 357 for the 2021 taxation year only, the Board will address the question of the quantum of the reduction in taxes here.

The Appellant’s Position

15The Appellant takes the view that the assessed value of the Subject Property should be reduced by the cost of repairs as per a prior Board Decision, Panagiotis v Municipal Property Assessment Corporation Region 15, 2019 CanLII 135404 (ON ARB) (“Panagiotis”). In that case, the Board reduced the assessed value by an amount reflecting the amount the owner paid to repair the building. The property taxes were correspondingly reduced.

16The Appellant states that the cost to make the Subject Property useable and compliant with all relevant building codes and regulations (“cost to cure” approach per the Appellant) amounted to $3,533,919 and that applying the applicable tax rate results in a corresponding tax reduction of $187,282.

17The Appellant submits that due to the nature of the required works (including fire safety) the entire building was closed to the public and that demolition was complete in 2021.

18At the hearing, the Appellant’s expert witness, Ben Matlin, testified that the $3.5 million figure represented both hard and soft costs and was a “very accurate” figure of the final cost incurred.

The Municipality’s Position

19The Municipality asserts that the correct approach to determining a reduction or refund in taxes is one that is based on the valuation of the Subject Property and any reduction or impairment in that valuation during the period of repair and renovation. The Municipality stated that to conduct this analysis it requires the expertise of MPAC.

20The Municipality’s expert, Eric Gollinger, testified at the hearing that the renovations have no impact on the valuation of the Subject Property.

21Further, the Municipality asserted that if the basis of any reduction in taxes is the total construction cost, then not enough information was available from the Appellant for it to make that determination.

The Board’s Analysis

22Neither party provided analysis nor supporting calculations for its respective position on tax relief. As such, the Board determined that it had insufficient information, evidence, and analysis to calculate the quantum of tax relief for the 2021 taxation year.

23At the conclusion of the hearing, the Board directed the parties to provide submissions, within 30 days, detailing their respective mechanism and figures for calculating tax relief for the 2021 taxation year.

24Those submissions of the Parties are addressed here.

Municipality’s Submissions

25The Municipality asserts that during the hearing, it was revealed by the Appellant that as of August 2021, the Subject Property’s fire alarm system was disabled due to the need for repair and that the cost of those repairs/replacement of the system amounted to $70,000. The Municipality takes the position that for the 2021 taxation year, only the fire alarm system qualifies for “repairs or renovations to the land prevented the normal use of the land for a period of at least three months during the year.”

26Further, it is the Municipality’s position that the appropriate method to determine the current value of the lands is through the replacement method. The Municipality’s calculations follow for the 2021 taxation year:

Assessment:

$12,757,000

Reduction in assessment:

$70,000

Municipality tax rate:

2.647768%

Number of days affected: (2021-08-01 to 2021-12-31)

153

$70,000 x 2.647768% = (annualized taxes)

$1,853.44

1,853.44 x (153/365) = (prorated taxes)

$776.92

27Per the above, it is the Municipality’s position that the appropriate refund for the Subject Property for the 2021 taxation year is $776.92.

Appellant’s Submissions

28The Appellant testified that the cost of the necessary work was $3,533,919.79 and that the amount of money spent in any one year is irrelevant. Per the Appellant, what is relevant is the amount of money that would be required to cure the deficiencies in the building consistent with the decision in Panagiotis, a decision in connection with an appeal under s. 357. In para. 31, the Board accepted the insurance Fire Proof of Loss as the quantum for the reduction in assessed value.

29Further, the Appellant points to Panagiotis para. 40 where reference is made to another s. 357 appeal, Canadian Property Holdings (Ontario) Inc. v. Municipal Property Assessment Corporation, Region 15, 2017 CanLII 78332 (ON ARB) (“Canadian Property Holdings”), in which the Board agreed that the change in value must reflect the entire period that the property remains substantially unusable.

30It is the Appellant’s position that the appropriate refund for the Subject Property for the 2021 taxation year is $39,223.38:

Reduction in Assessment:

$3,534,000

Municipality’s tax rate:

2.647768%

Number of days affected: (Aug. 1, 2021 to Dec. 31, 2021)

153

$3,534,000 X 2.647768% = (annualized)

$93,572.12

$93,572.12 X (153/365) = (prorated)

$39,223.38

31The Board distinguishes both Panagiotis and Canadian Property Holdings as follows. Panagiotis relates to fire damage, s.357(1)d(i), that occurred in November 2015 (vs. repairs/renovation per s.357(1)(g) as in the case here) and that rendered the property in that appeal closed for all of 2016. Further, the repairs to that property were made in the same year i.e., 2016. Canadian Property Holdings relates in part to the relationship between s. 357 and s. 364 of the Act. These matters are different to the question being asked here.

32Nonetheless, the Board accepts that it is the necessary quantum of funds spent to return the Subject Property to its normal use that is relevant and not whether those funds were spent in the year in which the damage occurred or a subsequent year.

CONCLUSION

33The Board finds that the best evidence before it, consistent with the provisions of s. 357 of the Act, yields tax relief of $39,223 for the 2021 taxation year as advanced by the Appellant.

ORDER

34The Board orders that the Appellant receive a tax refund in the amount of $39,223 for the 2021 taxation year.