Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 04, 2024

FILE NO.: WR 185794

Assessed Person(s): 2121 Cornwall Road Portfolio Inc.

Appellant(s): 2121 Cornwall Road Portfolio Inc.; H & R REIT-2175 Cornwall Road

Respondent(s): Town of Oakville

Property Location(s): 2175 Cornwall Road

Municipality(ies): Town of Oakville

Roll Number(s): 2401-040-210-05300-0000

Appeal Number(s): 3508807 and 3520311

Taxation Year(s): 2021 and 2022

Hearing Event No.: 782964

Legislative Authority: Sections 357.(8) and 357.(7) of the Municipal Act, 2001, S.O. 2001. C.25

APPEARANCES:

Parties Counsel

2121 Cornwall Road Portfolio Inc.; H & R REIT-2175 Cornwall Road David Fleet

Town of Oakville John O’Kane

HEARD: February 7 – 9, 2024 by telephone conference call

ADJUDICATOR(S): Subuola Awoleri, Member

DECISION

OVERVIEW

12121 Cornwall Road Portfolio Inc. (“Cornwall”) is the owner of 2175 Cornwall Road (the “Subject Property”). Cornwall and H & R REIT (an asset management firm having control of Cornwall and the Subject Property) are Appellants in these appeals. The Subject Property is a 29.57-acre land, improved with a free-standing industrial warehouse, with a total gross floor area of approximately 314,053 square feet, including a paved parking area.

2The Appellants filed applications with the Town of Oakville (the “Town”) for tax relief under s. 357(1)(d)(ii) and s. 357(1)(g) of the Municipal Act, 2001, S.O. 2001, c. 25, (the “Act”) for the 2021 and 2022 taxation years, citing the Subject Property was damaged by demolition, which rendered it substantially unusable as a warehouse and the repairs and renovations prevented its use as a warehouse for a period of at least three months during the year.

3For the 2021 taxation year application, the Town failed to make a decision, and Cornwall filed an appeal to the Assessment Review Board (the “Board”) under s. 357(8) of the Act.

4For the 2022 taxation year application, the Appellants appealed the Town’s decision under s. 357(7) of the Act seeking an increase in the quantum of relief.

5The Appellants commenced demolition, repairs and renovation of the Subject Property in late 2019 to May 2020, prior to the 2021 and 2022 taxation years under appeal, which the Appellants assert prevented the normal use of the Subject Property as a warehouse in 2021 and 2022. These taxation years in which physical alterations commenced on the Subject Property are not the subject of these appeals.

Background

6The Subject Property was historically industrially zoned as E2-SP 409, with a special provision called a Minister’s Zoning Order (“MZO”). There was also a Parkway Belt West Plan (“PWBP”) designation associated with the Subject Property. The MZO and PWBP designations restricted the development and use of the Subject Property.

7The MZO permits the Minister of Municipal Affairs and Housing (the “MMAH”) to determine the development and use of the Subject Property. This provincial restriction supersedes municipal zoning bylaws.

8The MZO restricted the development and use of the Subject Property including its use as a warehouse.

9Despite the existence of the MZO restricting the development and use of the Subject Property, in 1997, the Town granted the Appellants approval to construct a warehouse and parking area. Accordingly, the Subject Property was constructed and was leased and used as a warehouse.

10Cornwall leased the Subject Property to Livingston Logistics Services Ltd. (which became UPS Canada) between 1998 and April 30, 2019.

11Thereafter, in 2019, Cornwall conditionally leased the Subject Property for 10 years to Amazon Canada Fulfillment Services (“Amazon”), which was to commence January 1, 2020. Part of the condition was alteration of the parking area and building of the Subject Property by no later than December 31, 2020.

12The physical alteration of the Subject Property commenced late 2019, without the Appellants obtaining the requisite permits under the Ontario Building Code Act (“OBCA”) and approval under the MZO.

13In September 2019, the Town declined issuing the requisite permits for the building and site alterations.

14On January 3, 2020, the Appellants applied to the MMAH to revise the MZO and the PWBP designation to permit the development and use of the Subject Property as a warehouse/distribution centre with expanded shared parking.

15On May 14, 2020, the Town issued an Order to Comply to the Appellants, requiring Cornwall and Amazon to cease site alterations until the appropriate building permits were obtained.

16On May 19, 2020, the Town stated in its communication with the Appellants that the approval of the building permits would be dependent on the approval of the revised MZO.

17On January 11, 2021, Amazon terminated its conditional lease with Cornwall due to Cornwall’s non-compliance with the conditional lease of the timely development of the Subject Property to meet Amazon’s needs.

18The MMAH revised the MZO and PWBP designation on August 4, 2021, to approve the development and use of the Subject Property to include warehouse and parking.

19Cornwall filed an appeal to the Ontario Land Tribunal, (the “OLT”) due to the Town’s failure to make a decision regarding its site plan application.

20On October 19, 2021, the OLT approved the Subject Property’s site plan application.

21On February 24, 2022, Cornwall filed an application to the Town for tax relief for the 2021 taxation year pursuant to s. 357(1)(d)(ii) and s. 357(1)(g) of the Act.

22Cornwall signed a new lease with a new tenant to commence use of the Subject Property from September 1, 2022.

23On February 23, 2023, the Appellants filed an application for tax relief for the 2022 taxation year pursuant to s. 357(1)(d)(ii) and s. 357(1)(g) of the Act.

Areas of Agreement

24At the commencement of the hearing, the parties filed a “Partial Agreed Fact Statement” with the Board.

25The facts in agreement by the parties that are relevant to the determination of the issues in these appeals are:

a. The existence of the MZO on the Subject Property was known to the Appellant/Owner in mid-2019.

b. In 2019 the Subject Property was conditionally leased to Amazon. One condition of the Amazon lease was alterations of the parking area and building, which alteration began in late-2019, without obtaining the permits required under the Ontario Building Code Act, and without approval under the MZO.

c. All alteration work at the Subject Property ceased in May 2020.

d. The Subject Property was not used as a warehouse throughout all of 2020 and 2021.

e. The Subject Property began to be used for storage around May 2022 while renovation and repair was carried out for a new tenant, which began formal lease occupancy as of September 1, 2022.

Issues for the Hearing

26The issues to be determined are:

1. For the 2021 taxation year:

a. Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

b. If yes, what is the quantum of relief?

2. For the 2022 taxation year:

a. Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

b. If yes, should the quantum of relief be varied?

Result

27For the 2021 taxation year:

a. The Subject Property is ineligible for tax relief under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act.

b. This appeal is dismissed for the 2021 taxation year.

28For the 2022 taxation year:

a. The Subject Property is eligible for tax relief under s. 357(1)(g) of the Act.

b. Taxes were refunded in the amount of $13,129.93. This amount shall not be varied.

PRELIMINARY MATTERS

29The Town objected to the admissibility of a document titled “Your Property Profile” as part of the Appellants’ evidence which was served on the Town a day prior to the hearing.

30David Fleet, counsel for the Appellants, submitted that it was inadvertently omitted as part of the Appellants’ disclosure in these appeals. However, he added that it was provided to the Town on September 19, 2023 and in October 2023, as part of the proceedings before the Town. John O’Kane, counsel for the Town, acknowledged that the document was received by the Town on these dates. Consequently, Mr. Fleet submitted that there is no prejudice suffered by the Town if the document is admitted into evidence.

31Mr. O’Kane submitted that pursuant to Rule 35 of the Board’s Rules of Practice and Procedure, the Appellants must file all the documents it intends to rely upon at the hearing by the filing deadline, which was January 31, 2024. He added that this is to ensure adherence to the basic rule of procedural fairness, so that the Town will understand the case it has to meet and admitting this document would result in unfairness to the Town, since the Town did not have the opportunity to review the document prior to the hearing. However, Mr. O’Kane advised that if the Board should admit the document into evidence, he would need a short recess of the hearing to consider and review the document. This was granted by the Board.

32The Board admitted the document into evidence. The purpose of the rule regarding disclosure of documents prior to the hearing is to ensure procedural fairness to all parties, which eliminates the element of surprise at the hearing. The Town acknowledged that it had received the document prior to the hearing at an earlier proceeding before it, therefore, the element of surprise has been eliminated and there is no prejudice to the Town if the document is admitted into evidence.

ANALYSIS

2021 Taxation Year Application

Issue 1(a) - Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

33Sections 357(1)(d)(ii) and (g) of the Act provide:

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, [Emphasis added.]

(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. [Emphasis added.]

34The Board will first determine the issues raised by the Appellants in the determination of the Subject Property’s eligibility for tax relief under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act.

Does the demolition, repairs or renovations have to occur within the same taxation year of the claim, for tax relief to be available?

35There is no dispute between the parties that the physical alteration of the Subject Property began in late 2019 without the Appellants obtaining the required building permits under the OBCA and an amendment of the MZO. It is also not disputed that on May 14, 2020, the Town issued an Order to Comply, which required Cornwall and Amazon to cease work on the Subject Property, which they complied with and by May 2020 all physical alterations of the Subject Property ceased. Consequently, the parties agree that the Subject Property was not used as a warehouse throughout all of 2020 and 2021.

36Cornwall filed for tax relief for the 2021 taxation year, on February 24, 2022. The timing of this application is not at issue between the parties.

37Mr. Fleet submitted that there is no requirement under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act, which requires the demolition, repairs or renovations to commence in the taxation year for which a tax refund is claimed. He argued that once the Appellants have established that for the effective period, the damage by demolition rendered the Subject Property substantially unusable as a warehouse or that repairs or renovations prevented the use of the Subject Property as a warehouse, the Appellants are entitled to relief. He added that there is no discretion to be exercised by the Town to deny such relief once these facts have been established.

38Mr. Fleet argued that what occurred on the Subject Property was a single project of demolition, repairs and renovations which was interrupted by a single event, when the Order to Comply was issued, and this caused the substantial un-usability of the Subject Property as a warehouse from 2020 to August 31, 2022.

39Mr. O’Kane submitted that these sections of the Act create a within year eligibility, and the demolition, repairs or renovations must have been carried out in the year for which tax relief is claimed. He further submitted that the Appellants have the onus to prove on a balance of probabilities that there was demolition, repairs or renovations on the Subject Property in 2021. Furthermore, that the damages due to the demolition rendered it substantially unusable as a warehouse or that the repairs or renovations prevented the normal use as a warehouse for at least three months during the year.

40Mr. O’Kane further submitted that the building alteration commenced by the Appellants in 2019, was an unlawful work, since the Appellants did not obtain the requisite building permits before commencing the alterations on the Subject Property.

Findings - Does the demolition, repairs or renovations have to occur within the same taxation year of the claim, for tax relief to be available?

41The modern principle of statutory interpretation is commonly used by the Board in interpreting the Act. The words of a statute must 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". See 2198806 Ontario Inc. v. Windsor (City), 2021 CanLII 132950 (ON ARB) at para. 22 (“2198806 Ontario Inc.”) and Canadian Property Holdings (Ontario) Inc. v. Municipal Property Assessment Corp., Region 15, [2017] O.A.R.B.D. No. 150 at para. 12 (“Canadian Property Holdings”).

42The Courts have determined that s. 357 of the Act is a remedial section which provides “essential justice to taxpayers” who come within any of the enumerated exceptions. See Wilkes and Interlake Tissue Mills Co. Ltd., 1968 CanLII 40 (ON CA), [1968] 2 O.R. 589-594 (“Wilkes”) and Canadian Property Holdings at para. 13.

43In 810277 Ontario Ltd. v. Regional Assessment Commissioner, [1995] O.M.B.D. No. 359, (“810277 Ontario Ltd.”), the Ontario Municipal Board (“OMB”) in its interpretation of s. 440(1)(C)(ii) (now s. 357(1)(d)(ii)) of the Act, also adopted the reasoning of the Ontario Court of Appeal in Wilkes on the purpose of these sections of the Act. It determined at para. 9 that:

… these provisions are designed by the legislature to provide for the necessary safety-valves and individual reliefs in an otherwise mechanistic edifice that generates the necessary source of municipal revenue.

44On the other hand, the OMB provided at paras. 11 and 12 two cautions in the application of these sections:

Firstly, these provisions should not be interpreted as matters of statutory rights flowing to the owners; they are matters for which discretionary reliefs can be given. …

Secondly, the Assessment Review Board or the Board, in exercising its statutory review must ensure that the claimant should be brought squarely within the exonerating provision, to avoid throwing additional taxation burdens on other taxpayers. … A reduction or remission of taxation, however justifiable it may be, would have an effect on the overall taxation. An adjudicator must be most vigilant to opening a floodgate whereby the remission might become a rule instead of an exception.

45Giving due recognition to the remedial nature of the legislation, the provisions in s. 357(1) are exceptions to the mandatory requirement to collect taxes, therefore Part X of the Act only provides for a narrow range of circumstances in which a taxpayer is not required to pay municipal taxes. See Bayshore Shopping Centre Limited/KS Bayshore Inc. v. Ottawa (City), 2022 CanLII 78197 (ON ARB) at paras. 43 and 44 (“Bayshore”).

46Although these sections of the Act are remedial sections, the Board still has to ensure that the Appellants are qualified for tax relief under these sections. As Mr. O’Kane submitted, the Board carries out this legislative mandate, in order that essential justice is done not only to the Appellants, but also to other taxpayers. As Schroeder J.A. in Wilkes determined:

“… the legislators have given a broad discretionary power to Courts of revision to do what justice and equity may require in cases falling within the purview of s-s. (1)”. [Emphasis added.]

47In 2198806 Ontario Inc., at para. 23, the Board cited the decision in 2397146 Ontario Inc. v. Brampton (City), 2018 CanLII 37737, where the Board determined at para. 17 that essential justice must be exercised within the limits set in the Act. Specifically, the Board determined that:

… Essential justice must be accomplished within the confines set out in the legislation. There is no broad power to make taxpayers whole. Rather, the legislation sets out how that objective is to be achieved. Subsection 357(1) sets out the grounds of relief, which are broad, but the legislation also sets clear deadlines for applications and appeals. The remedial purpose of the tax refund provisions does not rewrite the legislation.

48Therefore, in carrying out essential justice to the Appellants and ensuring that justice and equity is achieved, the Board must determine if the Appellants fall within the purview of the subsections of the Act for which relief is claimed.

49The purpose of s. 357 of the Act is to allow for adjustment of taxation for a property that qualifies under the enumerated grounds during the taxation year of application by the taxpayer. In Canadian Property Holdings at para. 17 the Board determined that:

… 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." [Emphasis added.]

50In 2198806 Ontario Inc., one of the issues the Board had to determine was if the property was eligible for relief under s. 357(1)(d)(ii). Specifically, whether the demolition did not occur in the year in which relief was sought or the preceding year after the return of the assessment roll.

51In 2198806 Ontario Inc., there was no dispute between the parties that the company was closed for approximately 11 months in 2017 and therefore unusable. The Board determined at para. 64 and 65 that:

Regarding "the preceding year after the return of the assessment roll", the roll return date is defined in s. 36(2) of the Assessment Act as "not later than the second Tuesday following December 1". For the 2016 taxation year that date is December 13, 2016. The evidence before the Board does not establish that the demolition occurred during the period of December 13 to 31, 2016.

…based on the wording of s. 357(1)(d)(ii), the Board finds that the Property does not qualify for relief because the demolition which caused it to be substantially unusable occurred prior to 2017. [Emphasis added.]

52The appellant company in 2198806 Ontario Inc. made a request to the Board to review the Hearing Member’s decision. In its submissions before the Board, amongst other things, the company submitted that the Hearing Member erred “finding that the Company was ineligible for relief pursuant to subclause 357(1)(d)(ii) for the 2017 taxation year as a result of "too narrow an interpretation" of that provision”.

53In 2198806 Ontario Inc. v. Windsor (City), 2023 CanLII 1778 (ON ARB) at para. 54, the reviewing panel held that:

The Hearing Member, in her discretion, appropriately considered and applied the provisions of s. 357(1)(d)(ii). The Board finds that the Hearing Member did not make an error in her interpretation of s. 357(1)(d)(ii).

54In 2198806 Ontario Inc. v. The Corporation of the City of Windsor, 2024 ONSC 139, the applicant company applied to the Divisional Court for a judicial review of the Board’s decision. One of the issues for review was whether the “Board erred in requiring demolition to take place in the year for which relief was sought”?

55One of the applicant company’s submissions at the Divisional Court was that “the Board adopted a novel interpretation of the statutory provision and unreasonably failed to explain its departure from existing jurisprudence”. This is similar to Mr. Fleet’s submission, that there is no requirement in the Act that the demolition, repairs or renovations commence in the year of claim.

56The Divisional Court dismissed its application and held at para. 15-18 that:

… Section 357 specifically refers to relief available during the year in which the building was "damaged by...demolition." …

The Board found that the property did not qualify for relief because the demolition which caused it to be substantially unusable occurred prior to 2017 and did not occur in 2016 after the return of the assessment roll. It noted that the only demolition in 2017 was of a small area of the property that did not render the building substantially unusable. [Emphasis added.]

Given the specific requirement that the building be damage by demolition "during the year" in which tax relief was sought, it was open to the Board to interpret the provision as requiring the demolition and resulting damage to have occurred during that year.

I disagree that the Board's interpretation departs from existing jurisprudence in any significant way.

57The Divisional Court further distinguished some cases, which were also part of the authorities that the Appellants in this appeal relied on to support their argument. The Court held at para. 19-20 that:

In Canadian Property Holdings (Ontario) Inc. v. Municipal Property Assessment Corporation, Region 15, 2017 CanLII 78332 (ON ARB), the property demolition occurred and continued to keep the property substantially unusable through the tax year for which relief was sought. The decision does not address demolition that occurred in a prior year.

In Panagiotis v. Municipal Property Assessment Corporation Region 15,2019 CanLII 135404 (ON ARB) the Board granted relief on the basis that a fire in late 2015 rendered the property unusable for the 2016 taxation year. While the result is consistent with the applicant's submission, the question of whether the property owner was entitled to relief in the year after the fire was not an issue in dispute. The Board did not expressly rule on it.”

58Mr. Fleet submitted that the Divisional Court did not specifically decide the same issue under s. 357(1)(g), which provides (for ease of reference):

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,

(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. [Emphasis added.]

59Reading this subsection of the Act in its entire context indicates that there are time limitations which the taxpayer must meet to qualify for relief. The repairs and renovation should have occurred in the year of application.

60In General Motors of Canada Ltd. v. St. Catharines (City), [2006] O.A.R.B.D. No. 86, (“General Motors”), General Motors appealed the decision of the municipal council of St. Catharines rejecting its applications made under s. 442(1)(g) of the Act, (similar to s. 357(1)(g)) for the 2000 and 2001 taxation years. Part of the issue the Board had to determine was: “Do the time frame(s) within which the respective work was carried out satisfy the time limitations of S. 442(1)(g) of the Act”? Evidence was adduced by General Motors which showed the portions of the property in which repairs and renovations were carried out for each of the taxation years in which tax relief was claimed. The Board held at paras. 12, 34 and 35 that:

The Board accepts Mr. Henderson's evidence with respect to the specific work that was carried on in the year 2000 in areas I ,2,3,and 4 and in the year 2001, in areas A, B,C,D and E, the Board also accepts Mr. Hendersons' (sic) evidence with respect to the time frame that the specific work was carried out in 2000 and in 2001.

The Board is satisfied based upon the uncontradicted evidence of Mr. Henderson that the time frames within which the respective work was carried out satisfy the time limitations of subsection 442(1)(g).

For both 2000 and 2001 all of the specified areas were out of normal use for at least three months during the year.

61The Board in General Motors identified that there are time limitations under s. 442(1)(g) of the Act, (similar to s. 357(1)(g)), which this panel also recognizes. The evidence must demonstrate that there were repairs or renovations which prevented the use of the Subject Property as a warehouse for at least three months during the year for which relief is claimed.

62The Board finds that under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act, the demolition, repairs or renovations should occur in the same taxation year of the claim for tax relief to be available to the Appellants.

Were there any demolition, repairs or renovations in 2021?

63Having determined that the demolition, repairs or renovations should occur in the same taxation year in which tax relief is sought by the Appellants, the Board has to determine if there were any demolition, repairs or renovations on the Subject Property in 2021, in order to determine its eligibility for tax relief.

64Cornwall’s application for tax relief for the 2021 taxation year, was filed under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act, for the effective period of January 1 to December 31, 2021. It included a brief handwritten description which reads:

Town of Oakville issued a (sic) Order to Comply with halting the ongoing renovations. For the majority of 2021 continuation of renovations was not possible. Building was not usable.

The Evidence

65Dorothy Marshall, a witness for the Appellants testified that her first visit to the Subject Property was on May 4, 2021, where she observed that the Subject Property was entirely vacant and unused. She further testified that the interior partitions were demolished, several plumbing fixtures and lightings and floor coverings were removed and that partially complete partitions were erected. Ms. Marshall further directed the Board to some photographs in the Appellants’ evidence which showed the state and condition of the Subject Property on May 4, 2021.

66All these alterations were carried out by Cornwall and Amazon and it ceased when the Town issued an Order to Comply on May 14, 2020.

67During cross-examination, Ms. Marshall admitted that the demolition, repair and renovation timeline, presented into evidence by the Appellants, which shows the alteration work on the Subject Property from March 2020 to September 1, 2022, was developed by her, based on her interview with the Appellants’ representatives. She further admitted that for the November 21, 2021 and December 13, 2021 timeline, where she commented that Cornwall resumed demolition, repairs and renovations, there was nothing presented into evidence to confirm that this occurred on the Subject Property during these months.

68David Fair, the Vice President of leasing (Industrial) for H & R REIT, also a witness for the Appellants, confirmed Ms. Marshall’s testimony of the state and condition of the Subject Property in 2021. He further testified that he was the representative Ms. Marshall spoke with, to confirm the activities on the Subject Property when she created the demolition, repair and renovation timeline. He also testified that on November 21, 2021, there was some discussion and correspondence that repairs would resume on the Subject Property. He added that on December 13, 2021, based on correspondence, by this time there were individuals on the Subject Property carrying out some degree of work.

69The Appellants presented invoices dated December 6 and 13, 2021 that covered 24-hour guard service for indoor and outdoor guard patrol. Ms. Marshall testified that security was part of the construction work, since the sprinkler system was demolished, and the Subject Property required 24-hour security in case of a fire. However, during cross-examination, she admitted that the first thing the security would do in case of a fire is to call the fire department.

70The Appellants also presented some invoices related to regularizing the MZO and planning services carried out in 2021. Ms. Marshall admitted during cross-examination that the work carried out by McIntosh & Perry, a planning consulting firm, was not associated with demolition, repairs or renovations of the Subject Property, but rather with regularizing the MZO.

Findings - Was there any demolition, repairs or renovations in the 2021 taxation year?

71The Board finds that based on the evidence presented by the Appellants there was no demolition, repairs or renovations that occurred on the Subject Property in 2021. The Board also finds that there was no demolition during the preceding year after the return of the assessment roll. The roll return date under s. 36(2) of the Assessment Act, R.S.O. 1990, c. A.31 (“Assessment Act”) is “not later than the second Tuesday following December 1”, which is December 8, 2020. There was no evidence of demolition at the Subject Property during the period of December 8 to 31, 2020.

72The invoices presented by the Appellants in 2021, were not associated with the demolition, repairs or renovations of the Subject Property. Ms. Marshall admitted during cross-examination that there were no construction, demolition and repair invoices in 2021 because the construction work was interrupted and could not continue.

73The Board notes that Mr. Fair and Ms. Marshall admitted during cross-examination that there was nothing presented into evidence by the Appellants to show that work resumed on the Subject Property on November 21, 2021 and December 13, 2021. Moreover, the timeline presented by the Appellants for commencement of work on November 21, 2021, to the end of the year, December 31, 2021 is less than three months to come within the time limit under s. 357(1)(g) of the Act.

Delay in completing construction work - demolition, repairs and renovations

74Mr. Fleet submitted that these appeals should be reviewed as a single event of damages to the Subject Property, which started in late 2019, was interrupted and completed by September 1, 2022. Therefore, he concluded that the focus of the Board should be the un-usability of the Subject Property as a warehouse during the applicable taxation years to grant tax relief to the Appellants.

75Mr. Fair testified that when Cornwall signed the conditional lease with Amazon in November 2019, it was the expectation that all alteration to the Subject Property was to be completed before December 31, 2020 and that the MZO and PBWP were the primary obstacles to its completion. Mr. Fleet submitted that Mr. Fair intended to state that they were the cause of delay to completing the renovations.

76Mr. O’Kane argued that based on the testimony of the Appellants’ witnesses, the construction work of 2019 – 2020 cannot be the basis for relief in 2021, since the construction work did not occur in 2021, therefore it was not the construction work that caused the un-usability of the Subject Property as a warehouse. Mr. O’Kane further argued that in accordance with the Appellants’ witnesses’ testimonies, it was the MZO that prevented the property from being used as a warehouse and since this is not a basis for tax relief, the Appellants are unable to satisfy the factual requirements of these sections of the Act.

77Mr. Fleet cited the Divisional Court decision in Haldimand County v U.S. Steel Canada Inc., 2016 ONSC 5286 (“U.S. Steel”). He submitted that in this case, although some elements are different from the present appeals, the basic concept of essential justice for the taxpayer tied to the use of the land is the same.

78In U.S. Steel, on two occasions during the claim period, U.S. Steel voluntarily locked out its employees from the site, due to its inability to reach a collective agreement with the Union, when steel production ceased due to lack of orders. These periods where the employees were locked out formed part of its claim periods.

79U.S. Steel applied to Haldimand County for vacancy tax rebates under s. 364 of the Act, for periods in 2009, 2010 and 2013. It was denied. U.S. Steel appealed the decision to the Board, which allowed its appeal in part, by dismissing the appeal for 2009 and allowing for periods in 2010 and 2013. The Board determined that “the reason for the vacancy (a lockout of employees) did not disqualify U.S. Steel from entitlement to a vacancy rebate”. Leave was granted by the Divisional Court to Haldimand County to appeal the Board’s decision.

80One of the submissions made by the respondent in the appeal at the Divisional Court was that “there is no municipal or Board discretion to deny a vacancy tax rebate due to the reason for vacancy… a vacant building is a vacant building, regardless of the cause of the vacancy."

81The Divisional Court held inter alia at para. 37 that:

Property owners qualify for a vacancy tax rebate when a property meets the provincially stipulated criteria. The legislation does not grant jurisdiction to a municipality or the Board to exercise their discretion to deny a vacancy rebate due to the reason for the vacancy. Neither section 364 of the Act nor Regulation 325/01 make reference to any aspect of labour relations.

82Mr. Fleet submitted that even in this situation, where the appellants caused the damages, they were entitled to tax relief. However, he added that in this appeal, the Appellants started the demolition, repairs and renovations, but it was stopped by outside impact after which it resumed.

Findings - Issue 1a - Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

83The case of U.S. Steel is distinguishable from this appeal. The application in U.S. Steel was made under s. 364 of the Act for a vacancy rebate for eligible properties as provided under section 1 of O. Reg. 325/01. This section is not applicable to s. 357 of the Act, even though they are both remedial sections providing tax relief to taxpayers. The word shall is used in s. 364, while may is used in s. 357, indicating that there is no discretion to be exercised under s. 364.

84In Bayshore, the moving parties filed applications/appeals with the Board under s. 357(1)(d)(ii) of the Act, asserting that the legal and government restrictions during COVID-19 pandemic damaged their properties. The Board determined that the word damage in s. 357(1)(d)(ii) requires the building to be physically damaged. It does not include legislative damage.

85The Board notes that the Appellants knew about the MZO in mid-2019, and still carried out the physical alteration to the Subject Property without the requisite building permits issued by the Town. Ms. Marshall and Mr. Fair testified that it is the usual practice in the construction industry to commence construction without first obtaining the building permits. This does not make it permissible. The two witnesses for the Appellants testified that obtaining the amendments to the MZO took longer than anticipated, which delayed the completion of the renovations. The Appellants are now arguing that the Board should determine this as a single event that spanned over two taxation years and the focus should be on the un-usability of the Subject Property as a warehouse. The Appellants want to benefit from their own error. The Board cannot read this meaning into the legislation, as it is a yearly application and the damages to the Subject Property must have been caused by demolition under s. 357(1)(d)(ii) that occurred in 2021 or during the preceding year after the return of the assessment roll to render it substantially unusable or that the repairs or renovations prevented the normal use of the Subject Property for at least three months during the year under s. 357(1)(g) and, in this appeal, this did not occur in the 2021 taxation year.

86Furthermore, the Board determines that the un-usability of the Subject Property must be triggered by the events, enumerated under the Act. As explicitly stated under s. 357(1)(d)(ii) of the Act, the cause of the damage to the land is by fire, demolition or otherwise or under s. 357(1)(g), the repairs and renovations prevented its use as a warehouse. The Board did not receive submissions from the Appellants that the “otherwise” clause enumerated in s. 357(1)(d)(ii) includes a provincial regulation. Notwithstanding, as determined in Bayshore at para. 49, s. 357(1)(d)(ii) is restricted to physical events that cause damage to a building.

87The Board has determined that there was no demolition, repairs or renovations on the Subject Property in 2021. Consequently, the Board finds that the Subject Property is ineligible for tax relief and the Appellants tax relief claim for the 2021 taxation year is dismissed.

2022 Taxation Year Application

Issue 2(a) - Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

88The Town decided that the Appellants are entitled to tax relief under s. 357(1)(g) of the Act for the effective period of January 1 – August 31, 2022, and provided the Appellants with a tax refund in the amount of $13,129.93.

89Under s. 357(10) of the Act, the Board may make any decision the council could have made. In order to make this decision, the Board has to determine the Subject Property’s eligibility for tax relief under s. 357(1)(d)(ii) and s. 357(1)(g) of the Act.

90The Board has already determined that the demolition, repairs or renovations should occur within the same taxation year of the claim, for the Appellants to be entitled to tax relief.

The Evidence

91Ms. Marshall testified that on February 23, 2022, representatives of the Town, MPAC’s assessor Jeff Leedale, and herself inspected the Subject Property. She testified that the state and condition of the Subject Property on this date was similar to what she observed when she inspected it on May 4, 2021, except that some partially erected partitions were removed, and some concrete slab cuts were partially filled. Her testimony was corroborated with photographs of the Subject Property taken during the inspection, which were reviewed by the Board. Ms. Marshall further testified that it would have been impossible for the Subject Property to be used as a warehouse in that condition, since a forklift would not be able to access the floors to move around.

92Ms. Marshall also testified that she inspected the Subject Property on May 20, 2022, and that the state and condition of approximately 70% of the Subject Property remained the same as it was first inspected on May 4, 2021. However, there were additional interior renovations carried out and approximately 30% of the Subject Property was used as storage by a new tenant. Mr. Fleet submitted that the Appellants are not claiming tax relief for the 30% used portion of the Subject Property. Ms. Marshall also testified that portions of previously dug up concrete floors had been repaired.

93Mr. Fleet directed the Board to a diagram in Ms. Marshall’s witness statement, which showed Ms. Marshall’s estimation of the portion of the building used as storage by the new tenant. Mr. Fair also acknowledged in his testimony that this diagram reflects the storage space. He further added that renovation work was ongoing on the Subject Property prior to the use of this space as storage and thereafter, while personally he would not have found the space useable, but the tenant found it useful by using 30% of the space as storage. The parties are only in agreement with respect to the new tenant using a portion of the Subject Property as storage, the percentage of usage remains in dispute.

94During cross-examination, Ms. Marshall admitted that she did not measure the portion used for storage with a tape, but it was an estimate. The Board notes that the Town’s witness, Danielle Tummon, Manager, Revenue Services and Taxation, admitted that in 2022 the physical state of the Subject Property was the same as 2021, except for the 30% portion that was used as storage. Furthermore, she admitted that she did not present any documents to prove that the Subject Property was used as a warehouse from January 1 – August 31, 2022.

95In Ms. Marshall’s witness statement, she asserts that “… approximately 30% of the warehouse was in use as storage while the remainder of the Subject Property was actively undergoing renovation.” MPAC’s assessor’s notes which were presented into evidence by the Appellants, also provides that the property was vacant and under renovation.

96In the Appellants’ 2022 application for tax relief, was a brief description of the basis of the claim, stating that “The property was undergoing substantial renovations which prevented use of the property until September 1, 2022”.

97The Appellants also presented into evidence invoices of work carried out in 2022. These invoices included construction work, 24-hours security and consulting work carried out by McIntosh & Perry. These invoices revealed that some construction work spanned over 3 months, while others did not.

Findings - Issue 2a - Is the Subject Property eligible for tax relief under s. 357(1)(d)(ii) and/or s. 357(1)(g) of the Act?

98The Board finds that based on the evidence presented by the Appellants, the Subject Property is eligible for tax relief under s. 357(1)(g) and not s. 357(1)(d)(ii) as the major work carried out on the Subject Property in 2022 was repairs and renovations which prevented the use of the Subject Property as a warehouse for a period of at least three months in 2022.

99The Board finds that on the balance of probabilities it is more probable than not that 30% of the Subject Property was used as storage since Ms. Marshall was physically present for the inspection. However, the Town based the calculation of the tax refund on the assumption than none of the property was in use, and further generously used the effective period of January 1 to August 31, 2022 to grant tax refund to the Appellants.

Issue 2(b) - Should the quantum of relief be varied?

100The Act does not stipulate the method to calculate the quantum of relief. This determination is made on a case-by-case basis. In Michalakos v. Mississauga (City), 2020 CanLII 28973 (ON ARB) (“Michalakos”) at para. 18, the Board stated that:

The purpose of s. 357 is clear. The amount of municipal taxes payable is determined, in major part, by the value of the property. lf the value of the property is reduced due to any of the circumstances enumerated in this section, in this case damage by fire, then it follows that the amount of municipal taxes payable should be reduced to reflect the reduction in property value. The method used to determine the quantum of the reduction in value must reflect this purpose. Absent any legislative formula or direction, this determination is case specific, and the method used to determine the reduction must be supported by the evidence adduced. [Emphasis added]

101The current value assessment (“CVA”) of the Subject Property for the valuation day of January 1, 2016, was determined by MPAC using the cost approach. In the cost approach, the value of the land, and the value of the building summed together results in an estimate value of the Subject Property. In Michalakos, the CVA of the property substantially damaged by fire was also determined using the cost approach. The Board determined at para. 22 that “Determining the quantum of the reduction in value must be evaluated in the context of this valuation method”.

Town’s Methodology in Calculating the Tax Refund

102For the 2022 taxation year application, Ms. Tummon testified that the Town used the cost to cure approach to calculate the tax refund. This is the cost incurred by the Appellants to restore the Subject Property to its original state and condition, and this represents the reduced value of the property.

103Ms. Tummon also testified that upon receipt of the Appellants’ 2022 tax relief application, the Town reviewed the application with other departments to check if there were any permits approved. The Town forwarded it to MPAC for review and recommendation. She added that the Town received MPAC’s response which provided, amongst other things, that the reason for the application was repairs and renovations and that the 2022 taxation year assessment appeal to the Board resulted in a revised CVA from $36,874,000 (apportioned as $34,040,300-CT, $2,833,700-CU) to $33,022,000 (apportioned as $29,053,300-CT, $3,968,700-CU). MPAC further stated that the revised CVA accounted for the demolished portions of the interior offices.

104Ms. Tummon added that this amounted to no recommendation by MPAC. She further testified that the Town, through its review of the application, believed that there was a tax refund due under s. 357(1)(g) of the Act for repairs and renovations. This was based on the inspection carried out by the Town on February 23, 2022 and a review of the invoices attached to the Appellants’ tax relief application. However, she further added that she only aggregated the invoices relating to repairs and renovations of the building, which were past three months, while the invoices associated with planning fees from the 2021 revision of the MZO and 24-hour security of the Subject Property were excluded.

105Ms. Tummon also testified that the Subject Property became useable as a warehouse on September 1, 2022, when the new tenant commenced its tenancy. Therefore, the effective period of the application was from January 1 to August 31, 2022, a total of 243 days. She added that based on the invoices the cost of repairs and renovations for the 2022 taxation year was $1,221,673.24. The Town deducted this amount from the revised CVA of $33,022,000 resulting to a reduced value of $31,800,327. The change amount of $1,221,673.24 was applied to the 2022 commercial tax rate.

106During cross-examination, Ms. Tummon, was questioned about this approach on whether she had any evidence to prove that the cost of repairs and renovations in 2022 was the same on January 1, 2016 (since the Town used the revised CVA of the Subject Property as of the valuation date of January 1, 2016). Ms. Tummon responded that she thought it was acceptable since the Act speaks to assessed values.

Town’s tax refund calculation

$1,221,673 (CVA Change) x 1.614336% (2022 CT tax rate)

$19,721.91 Tax Levy

$19,721.91 (Tax Levy) / 365 days x 243 days (Effective Period)

$13,129.93 Refund Adjustment

Appellants’ Methodology in Calculating the Tax Refund

107In calculating its tax refund, the Appellants used 100% of the building value of the Subject Property in the amount of $16,908,851 for the effective period of January 1 to May 19, 2022 and 70% of the building value from May 20 to August 31, 2022. The building value was presented into evidence by the Appellants in MPAC’s 2022 property profile of the Subject Property.

108Mr. O’Kane questioned the authenticity of the MPAC document, since it is a working copy that belongs to MPAC’s assessor, Mr. Leedale, and Ms. Tummon testified that as a working copy, it is subject to change. However, Ms. Tummon admitted during cross-examination that it is an MPAC document, and it was MPAC’s CVA of the building portion of the Subject Property. Ms. Tummon further admitted that she understood how the Appellants arrived at the tax refund, although she has never seen a refund calculated using the whole building value.

109For the 2022 taxation year, Ms. Marshall testified that the building was unusable from January 1 – May 19, 2022, a total of 139 days. She applied the 2022 commercial tax rate of 1.61434% to 100% of the building value of $16,908,851 for a total of $103,952 in tax refund.

110For the 70% unusable portion of the building from May 20 to August 31, 2022, a total of 104 days, Mr. Fleet submitted that the refund should reflect 70% of the apportioned value of the building. Ms. Marshall testified that 70% of the building value is $11,836,196. She applied the 2022 commercial tax rate to this portion, which provides a refund in the amount of $54,444. Ms. Marshall testified that the total tax refund for the 2022 taxation year should be $158,395, for 234 days.

Appellants’ tax refund calculation

Building Tax Rate Jan 01 - May 19 May 20 - Aug 31 139 days 104 days 100% Building Value $16,908,851 1.61434% $ 103,952 70% Building Value $ 11,836,196 1.61434% $ 54,444 2022 Tax Year Rebate Total Days 234 Total Refund $ 158,395 Total Rebate Summary 2022 $158,395 (103,952 + 54,444)

Findings - Issue 2(b) - Should the quantum of relief be varied?

111The Board finds that the Town presented the best evidence on how to calculate the tax refund, using the cost to cure approach. Section 357(1) is based on use, consequently, the quantum of the refund/reduction must reflect the loss of use. In these appeals based on the evidence adduced, the cost to cure advanced by the Town reflects the loss of this use, which is the amount of money required to reinstate the use of the property. In Michalakos at para. 20, the Board determined that in using the cost to cure approach, “… how this cost is determined will depend on the individual circumstances of each case, but it must be consistent with the valuation method used to value the property”. See Canadian Property Holdings at para. 70.

112The Board observes that the Appellants did not present the Board with any detailed evidence regarding the specific information and data that MPAC considered in its property appraisal which resulted in the revision of the CVA of the Subject Property. The Appellants did not call MPAC as a witness to provide such evidence, neither did they present any affidavit evidence from MPAC regarding what was considered in assessing the building value of the Subject Property. See Michalakos at para. 18.

113The Board further determines that although the building was under repairs and renovations in 2022, the structure still existed and therefore, in accordance with the Assessment Act, it is liable to assessment and taxation under the Assessment Act and the Municipal Act. A total negation of taxes as calculated by the Appellants results to an exemption from taxes, which was not the intention of the legislation under s. 357(1)(g). Section 357(1)(c) of the Act has provided exemptions for certain lands, which is not applicable to the Subject Property. See Canadian Property Holdings at para. 69, and 151516 Canada Inc. v. Belleville (City) (Re), [2014] O.A.R.B.D. No. 489, at para. 23, where the Board determined that:

The approach taken by the City, on the other hand (in adopting the suggestions of MPAC) is to notionally consider an adjustment to the current value of the entire property that takes into account the loss of rental income for the vacant space. This does not result in a total negation of the taxes -- it reduces the taxes. This approach adheres more closely to the scheme of the Assessment Act and Municipal Act and achieves the purpose of the legislation, which is to make all land in Ontario subject to assessment and taxation and to provide for cancellation, reduction or refund of taxes under the circumstances set out in s. 357. It is not an exemption from taxes, except in s. 357.(1)(c) which contemplates land becoming exempt after the return of the roll.

114The review panel in Michalakos decided at para. 24 that the Hearing Member correctly decided to consider only the costs to repair the building and excluding other items such as emergency services. As the Appellants in this appeal presented evidence of invoices that included 24-hour indoor and outdoor security guard services and the cost of revising the MZO, the Board finds that the Town was correct to have used only invoices associated with only repairs and renovations of the building.

115The review panel in Michalakos further determined at para. 26 that:

The Board re-iterates that there is no prescribed methodology to determine the quantum of the reduction of the assessed value of the Subject Property, subject to the proviso that it be consistent with the valuation method used to determine the assessed value of the Subject Property. ln this case, based on the cost approach valuation methodology, the primary issue is the cost to repair the building. The cost actually paid to repair the building, therefore, is both relevant and probative. [Emphasis added]

116Further to this finding, the Board observes that, in Michalakos, the claim was made under s. 357(1)(d)(ii) where the building was damaged by fire. In such circumstances, when determining the quantum of a reduction/refund, the Board focused its consideration of a reduction in property value due to the fire damage, but even so, the Board found that the cost to cure was the better approach. In this case, the claim is made pursuant to s. 357(1)(g) where the refund/reduction does not address a reduction in property value per se. Instead, it is to compensate for an interruption in the use of the property. The repairs/renovations caused a delay in the commencement of the intended use of the building. As such, in this case, the cost to cure reflects the financial cost to place the Subject Property in a useable condition. The Board finds that this approach more closely aligns with the purpose of s. 357(1)(g).

117For the 2022 taxation year, the Appellants provided the Town with invoices associated with repairs and renovations of the Subject Property. The Town aggregated only invoices for repairs and renovations that spanned over three months to the amount of $1,221,673.24. The Board finds that this is the amount that represents the reduced value of the Subject Property.

CONCLUSION

118The 2021 appeal is dismissed. The Appellants did not discharge the onus of proving that there were damages caused by demolition, which rendered the Subject Property substantially unusable or that there were repairs or renovations that prevented the normal use of the Subject Property for at least three months in the 2021 taxation year.

119For the 2022 taxation year, there were repairs and renovations which prevented the normal use of the Subject Property as a warehouse for a period of at least three months. The Board finds that the Town provided the Appellants with the appropriate amount of tax refund in the amount of $13,129.93.

ORDER

120The Board orders that:

a. The 2021 taxation year appeal is dismissed.

b. For the 2022 taxation year, the amount of tax to be refunded is $13,129.93, which is the amount already refunded by the Town, therefore, the 2022 taxation year appeal is dismissed.