Thousands of purchasers of new condominiums are being over-charged for property taxes.
Here’s how it works: when a new condominium is ready for occupancy, the buyer gets the keys and can move in – but title will not be transferred for months.
The period between occupancy and the final closing, when title is transferred, is called the “interim occupancy period”. During this time, buyers pay the builder a monthly interim occupancy fee.
The components of this fee are set out in the Condominium Act, and include an amount “reasonably estimated” by the builder for unit’s municipal taxes. Most builders typically calculate the tax component by taking the purchase price of the unit as shown on the front page of the offer and multiplying it by 1 per cent. The result is then divided by twelve to get the monthly charge.
The 1 per cent figure is supposed to represent the city (of Toronto)’s mill rate which is a percentage used to arrive at annual taxes. The city sets the mill rate with its annual budget, and for every residential property in the city, the assessed value is multiplied by the mill rate to yield the annual property taxes.
The way some builders calculate estimated taxes, however, is not the way the city does it. And the result is a significant overcharge to buyers.
The correct method, which is how the city calculates taxes, is to take the assessed value of the unit, which is typically the purchase price minus the significant HST component, and multiply by the city’s official mill rate, which last year was 0.7056037 per cent.
Here’s how the numbers worked in a transaction in my office last month. The purchase price including tax was just over $868,000, and the price without HST was $789,720.
On occupancy the builder calculated the estimated taxes using the total purchase price – including HST – multiplied by 1 per cent. This resulted in estimated annual taxes of $8,377 for the unit.
The correct formula, which I had inserted into an amendment to the agreement, required the purchase price without taxes ($789,720) to be multiplied by the city’s mill rate for 2015 (0.7056037). This yielded a reasonably accurate estimate of $5,572 for 2015 taxes – a discrepancy of $2,805.
The purchasers had therefore been overpaying taxes of almost $234 monthly as part of their interim occupancy fees. For the almost 10 months they had been in possession, the tax overpayment was $2,314.
When I pointed this out to the builder’s lawyer the night before closing, he agreed that the calculations were correct and credited my clients were with the full overpayment.
Technically, each purchaser in the building and in hundreds of similar buildings, should be entitled to a readjustment from the builder – if they or their lawyers crunched the numbers.
In the same vein, builders often charge purchasers an overestimate of final taxes to the end of the year of closing and undertake to readjust with purchasers afterwards, but typically only on request.
With tens of thousands of new condominiums closing annually, the potential windfall to developers is huge.
There are two solutions to this problem. The first is to require builders to calculate the tax component of interim occupancy fees in a manner that corresponds to the way the city calculates taxes.
And the second is for purchasers and their lawyers to be on the alert and require builders to calculate estimated taxes more accurately.
Bob Aaron is a Toronto real estate lawyer. He can be reached at firstname.lastname@example.org, on his website aaron.ca and on Twitter @bobaaron2.
Pets. Landlords don’t want them in their properties. Tenants can’t live without them. Unfortunately, the law in Ontario just makes it worse for everyone.
Under the law, you can’t prevent a tenant from bringing a pet into your property, unless it is a condominium and the building declaration says no pets. So even if a landlord and tenant sign a lease that says no pets, the tenant can bring 2 dogs and 4 cats the next day and there is nothing the landlord can do about it.
Yet if the landlord has a no pet policy in the entire building, they can probably refuse to approve the tenant in the first place if they know the tenant has a pet. You start to see the problem. If the tenant is honest up front and tells the landlord they have a pet, their application can be refused. If the tenant lies on the application and then brings in a pet afterwards, there is nothing the landlord can do. The result is often a poisoned relationship, right from the start.
Some landlords ask tenants with pets for a security deposit when they move into the unit in order to pay for any damages the pet causes during the lease. Also illegal. In a landlord and tenant board case decided in Whitby on October 7, 2009, the tenant wanted to bring a pet onto the premises. The landlord demanded a $50 fee to bring the pet as well as an additional $50 per month which would go toward a carpet replacement fund when the tenant left. The adjudicator, Claudette Leslie, decided that both of these payment requests were illegal. The only amount a landlord can ask for in advance is last month’s rent, and it can only be used toward last month’s rent.
If your pet has caused damage to the home, then the landlord can evict you if you do not repair the damages. If you leave the unit damaged at the end of your tenancy, the landlord can go to small claims court and sue you for the damages caused. In another Board decision, a tenant was ordered to pay $250 to have the carpets steam-cleaned after their cat urinated on them. Scratches or bite marks caused by pets to the woodwork and floors of a home can cost hundreds, if not thousands of dollars to repair.
In other cases, tenants have been evicted because their pets barked all the time and were a nuisance to the other tenants in the building.
When you have a pet, bring references from prior landlords that confirm that you always looked after your pet and that you also took good care of the property while you lived there. This will assist you in convincing the current landlord that you will do the same with their property. It goes without saying that pets should always be properly groomed, to avoid any unnecessary damages as well.
Landlords, make sure that the tenant signs some form of rental unit condition statement when they move in and take pictures of the unit, so that you will have proof if any damages are caused by the tenant during the tenancy.
Landlords and tenants should not have to lie to each other. Treat each other with respect, even on pet issues, and the tenancy relationship will be a positive one for everyone involved.
Mark Weisleder is a real estate lawyer, speaker and author.
Mark’s Contact Information
Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at email@example.com or 1.888.876.5529
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