Remember in the spring of 2022 when the Federal Government introduced a tax on foreign-owned homes that are being left vacant?
Well, the City of Toronto and the City of Ottawa moved faster on any vacant homes. It’s now 2023 and these taxes are active in Toronto and Ottawa and any other municipalities that were ahead of things.
As of this year, all residential property owners in Toronto and Ottawa are required to make an annual declaration on the status of their property. Since this is now also an annual requirement, incorporate it into your yearly obligations.
The declaration also must be made before February 2nd, 2023, or you will face a $250 fine. Even if you live there. And if you falsely file, a penalty of up to $10K plus applicable taxes could be levied. If you haven’t already done so click here to submit your declaration for any owned residential property in Toronto (rental or personal use included).
So, if you leave any of your properties for a period of six months or longer without an exemption, you will be subject to this Vacant Home Tax. If you live in Peel Region, a decision has not yet been made, so stay tuned for the council’s decision, which should come in the spring. If you live elsewhere in the GTA, or in London, Windsor, or Hamilton, be ready to make similar declarations in 2024.
Exemptions
There are exemptions, however, if you’re not occupying your home for a period of six months or greater under certain conditions. Let’s summarize those:
- Death (proven with certificate).
- You are an owner in care (with a signed letter from a healthcare facility).
- If you 100% sell a property to a third party (land deed transfer needed).
- Employment purposes (employer letter needed).
- Court ruling that prevents occupancy (court order given).
- Renovations and repairs making home uninhabitable (City Chief Building Officer must sign-off).
- This assumes that permits are issued in a timely manner.
That is the current list, though you may notice certain situations are not included. Here’s what I’d like to see added to the exemption list:
- Homes that aren’t selling when you’ve already moved into another home.
- Short-term rentals.
- Natural disasters making a home uninhabitable.
- Vacant homes due to imprisonment.
- Owners that are out of the country for longer than six months.
- A combination of any of the above situations.
Additionally, this Toronto bylaw ignores a few other key items for landlords and tenants. Do they have their mail sent to their permanent living space? Do tenants pass along mail to their landlords? This could lead to a host of problems, especially in the first few years of implementation.
This tax will also impact property buyers, who will be on the hook if the seller fails to file and/or pay, or files incorrectly. As a realtor, I will now include clauses in our agreements of purchase and sale to address this new tax and avoid a negligence claim, similar to unpaid property taxes.
And at least for now with the Toronto bylaw, there is no statute of limitations. This means that a buyer could be responsible for unpaid taxes and fines for several years until this gap is closed. Considering that Toronto is already looking at raising the tax rate 5.5%, and the MPAC property values are slated to be updated at the start of 2024 (2016 values exist today), big problems could be on the way.
Now, throw in the Underused Housing Tax which will overlap, and it’s going to be more complicated to be a homeowner in Toronto. This tax generally applies to non-residents/citizens, partnership ownership and non-Canadian corporations. Given that it’s more nuanced, speak with your real estate lawyer and take a peek at the link above to see who is exempted and who is affected.
For more details on the Vacant Home Tax, see my 2022 summary of the Real Estate market.
Do you need help navigating any of the above changes? This is what I’m here for! Reach out to me for assistance with this bylaw, and anything real estate related!
Photo by Outsite Co on Unsplash
