Misdirected blame Has your property gone up in value in the past 10 years? Nearly every Ontario homeowner, cottager and commercial landlord has seen a steady rise in the worth of what may be their most valuable asset. Perhaps the only snag for property owners is the hefty property tax bill arriving in the mailbox. Property owners tend to place much of the blame for these high bills on the Municipal Property Assessment Corporation (MPAC), which sets the assessed value of properties for tax purposes. However, this blame may be misdirected. In an average year, MPAC assesses more than 4.5 million properties across Ontario. Under the Current Value Assessment (CVA) formula, MPAC uses recent sales of similar properties in an area to assess the current value of a property. In cases where an across-the-board valuation is flawed, property owners have several channels through which they can question and appeal their assessments. Of note, CVA is the industry-standard methodology and is used by every Canadian province and more than 120 countries worldwide. In 2004, the Ontario government responded to complaints of skyrocketing taxes by freezing the assessed value of most properties as at Jan. 1, 2005; the next province-wide property assessment will occur in 2008. During this fall's provincial election, one party proposed a five-per-cent cap on annual assessment increases for as long as an individual owns his or her home. Unfortunately, measures such as these only address part of the problem. The problem of skyrocketing property taxes may be directly related to the spending needs of municipalities. Although the electorate guides the spending decisions of municipalities, a municipality's new spending needs should be related to its population growth and inflation. Conveniently, in a market of rising home prices such as we have experienced in Ontario, both of these needs are met through assessments. As home prices rise, they automatically fund rising municipal spending. Some municipalities see property owners as a bottomless pit of money. Currently, no limit is in place for how much municipalities can raise taxes. While many municipalities add more properties to their tax roll and experience higher assessed values for properties, they don't concurrently compensate for this gold mine by reducing tax rates. Instead of finding savings internally, they often raise our taxes. Many politicians have allowed MPAC to take the blame for higher tax bills. This can partly be explained by confusion among property owners as to the role of MPAC. We believe this has gone far enough. We encourage property owners in the province to become more familiar with the limits of MPAC's mandate and the factors that make up a property tax bill. Peter is a Vice President of Real Estate Operations with the Real Estate Team. Peter is also a member of the Valuation, Fraud and Litigation Support Team. He can be reached at (416) 644-4489 or by e-mail at peter_aziz@mintzca.com. Mintz & Partners | 1 Concorde Gate, Suite 200, North York, Ont., M3C 4G4 | www.mintzca.com Phone: (416) 391-2900 | Fax: (416) 391-2748 | E-mail: info@mintzca.com The Key is an e-newsletter written by the Real Estate Team of Mintz & Partners LLP.Please go to http://www.mintzca.com/index.php?section=redirectory to learn more about our Real Estate Team. The issues raised are for information purposes only. Readers are urged to contact their professional advisors before acting on the basis of material contained herein. |