Ottawa Salus Corporation v. Municipal Property Assessment Corporation et al.

[Indexed as: Ottawa Salus Corp. v. Municipal Property Assessment Corp.]

62 O.R. (3d) 709

[2002] O.J. No. 4958

Court File No. 02-DV-770

Ontario Superior Court of Justice

Divisional Court

Then, Cusinato and Cumming JJ.

December 23, 2002

Assessment -- Exemptions -- Charitable institutions -- Exemption for land owned, used and occupied by any charitable, non-profit philanthropic corporation for relief of poor if corporation is supported in part by public funds -- Charitable institution providing housing and support services for homeless, mentally ill and unemployed -- Charitable institution renting units to clients who had exclusive possession of units -- Physical occupation by each tenant of given rental unit not detracting from fact that land as an entirety was "occupied" by charitable corporation in carrying on of its charitable activity -- Charitable institution entitled to exemption -- Assessment Act, R.S.O. 1990, c. A.31, s. 3(1)12(iii).

The appellant Ottawa Salus Corporation ("Salus") was a charitable corporation that provided housing and support services for people who are homeless, mentally ill, and unemployed. Salus as landlord rented out units to its clients, who [page710] had all the rights of exclusive possession of tenants under the Tenant Protection Act, 1997, S.O. 1997, c. 24. Until 1997, several Salus properties in Ottawa had been exempt from property tax under s. 3(1)12 of the Assessment Act, which then read: "Land of an incorporated charitable institution organized for the relief of the poor . . . conducted on philanthropic principles and not for the purpose of profit or gain, that is supported, in part at least, by public funds, but only when the land is owned by the institution and occupied for the purposes of the institution". In 1997, this provision was amended to read: "Land owned, used and occupied by, . . . (iii) any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds". Beginning in 2001, the respondent the Municipal Property Assessment Corporation assessed the Salus properties as taxable and no longer exempt. Salus applied for an exemption, but Polowin J. held that Salus did not qualify because it did not have physical occupation of the individual rental units because of the tenants' leases and, therefore, its property was not "occupied" by Salus within the meaning of the amended s. 3(1)12. Salus appealed.

Held, the appeal should be allowed.

While an exempting provision is to be narrowly interpreted, the legislative intent and purpose of the exemption must be kept in mind. The statutory pre-conditions of the land having to be "owned, used and occupied" by the charity serve the purpose of ensuring that the exemption is limited to land being used directly by the charity in carrying out its charitable activity. To fulfill its charitable purposes of providing relief for the poor, Salus must provide leases to the recipients of its services; this was a policy directive of the Ministry of Health. The real property of Salus was "occupied" by Salus in the sense that is was controlled, held and employed by Salus as the necessary prerequisite and means to fulfill its charitable mandate. The fact of the physical occupation by each tenant of a given rental unit did not detract from the fact that the land as an entirety was "occupied" by Salus in the carrying on of its charitable activity. Accordingly, the appeal should be allowed.

APPEAL from an order dismissing an application for an order that lands are exempt from property tax under s. 3(1)12 of the Assessment Act, R.S.O. 1990, c. A.31, as amended.

Cases referred to First Place, Hamilton v. Corp. of the City of Hamilton (1979), 9 M.P.L.R. 119, 12 R.P.R. 121 (Ont. S.C.); Maple Leaf Services v. Township of Essa and Petawawa, 1963 206 (ON CA), [1963] 1 O.R. 475, 37 D.L.R. (2d) 657 (C.A.); Religious Hospitallers of St. Joseph of Cornwall, Ontario v. Regional Assessment Commissioner, Region 1 (1998), 1998 2277 (ON CA), 42 O.R. (3d) 539, 168 D.L.R. (4th) 140, 49 M.P.L.R. (2d) 287 (C.A.), supp. reasons (1998), 42 O.R. (3d) 547, 168 D.L.R. (4th) 149 (C.A.); Vancouver (City) v. Coast Foundation Society (1974) (1991), 1991 1568 (BC CA), 6 M.P.L.R. (2d) 311, [1991] 6 B.C.A.C. 77, 13 W.A.C. 77 (C.A.), affg (1990), 2 M.P.L.R. (2d) 148 (B.C.S.C.) (sub nom. Coast Foundation Society (1974) v. Vancouver (City)) Statutes referred to Assessment Act, R.S.O. 1990, c. A.31, s. 3(1)12 [as am.] Tenant Protection Act, 1997, S.O. 197, c. 24

Janet E. Bradley, for appellant. James M. Canapini, for respondent Municipal Property Assessment Corporation. [page711]

BY THE COURT: --

The Appeal

[1] This is an appeal from the decision of Madam Justice Polowin dismissing the application of Ottawa Salus Corporation ("Salus") for an order that its lands are exempt from property tax pursuant to s. 3(1)12 of the Assessment Act, R.S.O. 1990, c. A.31, as amended (the "Act").

Background

[2] Salus is a charitable corporation, incorporated in 1977, which provides housing and support services for people who are homeless, mentally ill and unemployed. Salus owns several properties in Ottawa which, for many years, have been exempt from property tax. Until 1997, the exemption extended by s. 3(1)12 of the Act, read:

12. Land of an incorporated charitable institution organized for the relief of the poor . . . conducted on philanthropic principles and not for the purpose of profit or gain, that is supported, in part at least, by public funds, but only when the land is owned by the institution and occupied and used for the purposes of the institution.

This provision was amended in 1997, to read:

12. Land owned, used and occupied by,

(iii) any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.

The Evidence and Law

[3] The issue at hand arises because of differing interpretations asserted in respect of the amended exempting provision. The respondent, the Municipal Property Assessment Corporation ("MPAC"), beginning in 2001, assessed many of the Salus properties as taxable and no longer subject to the historical exemption.

[4] The former provision was not challenged historically by MPAC as not exempting the property of Salus from taxation. It was acknowledged that the subject land was "land . . . owned . . . and occupied and used for the purposes of [Salus]" as a charity organized for the relief of the poor within the meaning of the previous exemption.

[5] However, MPAC submits the amendment is not mere housekeeping on the part of the legislature. MPAC submits that [page712] the amendment has narrowed the previous exemption. The legislative record is silent as to the reason for the change in wording.

[6] Specifically, MPAC submits that the amended wording does not exempt the "[l]and owned, used and occupied by [Salus]" because Salus, as a landlord in respect of the units rented out to its clients, gives up occupancy to the individual tenants who have all the rights of exclusive possession generally enjoyed by tenants under the Tenant Protection Act, 1997, S.O. 1997, c. 24.

[7] MPAC submits that Salus must have actual physical occupation of the individual rental units to qualify for the exemption. The court of first instance, after a careful analysis, concluded that because Salus did not have physical occupation of the individual rental units because of the tenants' leases, the property was thereby not "occupied" by Salus within the meaning of s. 3(1)12. With respect, we disagree. Our reasons follow.

[8] In our view, the case law is inconclusive. The appellant relies heavily upon the decision of the British Columbia Court of Appeal in Vancouver (City) v. Coast Foundation Society (1974) (1991), 1991 1568 (BC CA), 6 B.C.A.C. 77, 6 M.P.L.R. (2d) 311 (C.A.). The court upheld an exemption from assessment on the basis of "actual occupancy" in circumstances where the charitable organization, with objects virtually identical to that of Salus, provided housing to the mentally ill in individual condominium units owned by the charity in various commercial condominium developments. The case is of limited usefulness because the residents were licensees and not full-fledged tenants with rights under the Tenant Protection Act, as in the instant case.

[9] On the other hand, the respondent relies upon a line of Ontario authority in support of the proposition that the establishment by the charity of a full-fledged tenancy, ousts the charity as an "occupant" of the lands. (See: Maple Leaf Services v. Township of Essa and Petawawa, 1963 206 (ON CA), [1963] 1 O.R. 475, 37 D.L.R. (2d) 657 (C.A.) at p. 480 O.R.; First Place, Hamilton v. Corp. of the City of Hamilton (1979), 9 M.P.L.R. 119, 12 R.P.R. 121 (Ont. H.C.J.) at pp. 149-50 M.P.L.R.; Religious Hospitallers of St. Joseph of Cornwall, Ontario v. Regional Assessment Commissioner, Region 1 (1998), 1998 2277 (ON CA), 42 O.R. (3d) 539, 168 D.L.R. (4th) 140 (C.A.) at p. 545 O.R.).

[10] We do not consider ourselves bound by these authorities because in each case the tenants were third parties who had no connection with the charity. In contrast, in the instant case the "tenants" are the very persons for which the charity exists. The residents in the units, owned and used by the appellants, are at the very core of the charitable purposes of the appellants which [page713] is the provision of low cost housing for the poor and the mentally ill.

[11] There is common ground that Salus is a registered charitable corporation organized for the relief of the poor and is supported by public funds provided by the Ministry of Health.

[12] To avail itself of the exemption, Salus must affirmatively establish that its property falls within the four corners of the exempting provision. Therefore, Salus must prove that the subject land which contains the rental units is "occupied by" Salus within the meaning of s. 3(1)12. It is admitted that the land is "owned" and "used" by Salus within the meaning of the provision.

[13] While an exempting provision from taxation is to be narrowly construed, the legislative intent and purpose of the exemption must also be kept in mind. That intent and purpose seems readily apparent in the instant situation. The legislature seeks to give relief from property taxation to a recognized charitable corporation "organized for the relief of the poor". The wording of the exemption should be interpreted, if reasonably possible to do so, so as to be consistent with the purpose of the exemption.

[14] The statutory pre-conditions of the land having to be "owned, used and occupied" by the charity serve the purpose of ensuring that the exemption is limited to land being used directly by the charity in carrying out its charitable activity. The tax expenditure subsidy, extended in the public interest, must be circumscribed such as to be directed only at the charitable activity recognized and approved by the legislature.

[15] To fulfill its acknowledged charitable purpose of providing the relief of the poor, Salus must provide individual leases to the recipients of its services. There is common ground that this arrangement is a requirement of a policy directive of the Ministry of Health. This stipulation provides the equivalent security of tenure to the beneficiaries of the charitable service as would be the situation with residential tenants in the ordinary commercial marketplace.

[16] Moreover, the approach serves to better integrate the beneficiaries into the community at large. The Ministry of Health provides a shelter allowance for each tenant which flows through to Salus as the rent to be paid. The staff and caseworkers of Salus supervise and manage the property and assist the tenants.

[17] As an aside, we mention that it is a reasonable inference that the charitable services of Salus result in a significant social benefit for the tenants and in significant social and economic advantages for the community at large, given the otherwise [page714] social and economic costs of tenants being either institutionalized or left homeless on the streets.

[18] The word "occupy" commonly means to physically reside in, as a tenant. However, the word is also ordinarily used as meaning to "take up" a place, or "to hold" a position or office (The Concise Oxford Dictionary, 9th ed. (Oxford: Oxford University Press, 1995) s.v. "occupy"), and "to keep busy; engage; employ" (The World Book Dictionary (Chicago: Doubleday & Co. Inc., 1979), s.v. "occupy"). That is, the word is not limited in its ordinary meaning to simply physical occupation.

[19] The real property of Salus that is the subject of the assessment is "occupied" by Salus in the sense that it is controlled, held and employed by Salus as the necessary prerequisite and means to fulfill its charitable mandate. The land is used solely for the charitable purposes of Salus; without the land, it would be impossible for Salus to fulfill its charitable purposes. The fact of physical occupation by each tenant of a given rental unit does not detract from the fact that the land as an entirety is "occupied by" Salus in the carrying on of its charitable business or activity. Indeed, the only way that Salus can carry out the very core purpose of its charitable mandate is to have the rental units in its building.

[20] A hypothetical analogy may be of assistance. If a car manufacturer has a factory manufacturing its vehicles in the course of carrying on its active business, one could easily say that the manufacturer "occupies" the factory property. One could also say that the managers "occupy" their offices and the assembly workers "occupy" the assembly line within the factory.

[21] The fact of a right of exclusive physical possession by a tenant to a rental unit does not alter the fact that the land as an entirety is "occupied" by Salus within the meaning of the exempting provision, given that the entirety of the property (including the rental units) consists of the carrying on of the charitable business of Salus. The tenants physically occupy their individual units; Salus occupies the property as an entirety within the meaning of s. 3(1)12.

Disposition

[22] For the reasons given, the appeal is allowed. The appellant is entitled to costs on a partial indemnity scale. Costs are fixed in the amount of $4,000 plus GST and disbursements, payable within 30 days.

Order accordingly.

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