Ontario’s Assessment Review Board has recently issued an important decision that has significant repercussions for the valuation of income-producing properties in Ontario.
The Board heard appeals by the owners of the downtown Toronto bank towers, with a collective assessed value of more than $5 billion. The Board ruled that income-generating properties must be valued as if they were vacant, or as if "unencumbered", in accordance with the Province’s assessment legislation. This means that the manner in which the Municipal Property Assessment Corporation ("MPAC") values many business properties in Ontario has now been invalidated.
At the time of this writing, it is unclear as to how MPAC will respond to the Board’s decision. The Board did not direct a specific new approach, other than to state that income-producing properties should be valued using a "hypothetical valuation construct".
It is expected that MPAC and the City of Toronto will appeal the decision to Ontario’s Divisional Court. If so, this issue will work its way through the court system over the next several years. It is for this reason that many expect the Province will introduce legislative clarification as to the manner in which business properties should be valued for assessment purposes.
However, pending legislative clarification or reversal of the Board’s decision on appeal, owners of income-producing properties should seriously consider filing an appeal of their assessment as there is now a sound basis on which to challenge MPAC’s valuation approach.
The deadline for filing an appeal for the 2008 taxation year is March 31, 2008.