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Tax Pulse by DMA Canada - Property Tax Ontario

by DMA Staff | Jun 27, 2016
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“Ontario is Changing Methodology” – UPDATE, Multi-Residential Properties


If you’re a multi-residential landlord or manager, did you know that MPAC has changed the method and approach they will use to establish the 2016 Current Value Assessment (2016 CVA) for the 2017 to 2020 taxation years.

Historically
For the past approximately 20 years, MPAC (and its predecessors) had valued all apartment buildings with more than seven rental units by way of a “Gross Income Multiplier” (GIM).

Basically, MPAC would determine a typical monthly rent per unit, annualize it by multiplying by12 to arrive at an annual rent. And that annual rent has a GIM applied to it to arrive at the assessment.

Simply put: (unit count X typical monthly rent) X 12 = Annual rent X GIM = Assessed Value

This simplistic approach to establishing a value has now come to an end.

2017 and Beyond
MPAC will now be using a “Direct Capitalization Approach” (DCA) to arrive at a multi-residential assessment. MPAC has a release (click here) that explains their rationale behind the change and their expectations.

Simply Accurate or Simply Flawed
That is the question…

The formula on the surface appears simple.  Value = Net Operating Income (NOI) / Cap Rate

What is not so simple is how an NOI is calculated. What is not so simple is what legitimate operating expenses are. What is not so simple is the detail required in investigating a sale. What is not so simple is the resulting cap rates.

Next Steps
MPAC is expected to release all commercial Notices of Assessment (NOA) on or after October 7, 2016. The NOA will have a few important dates indicated on them. The NOA will have the date by which to file a “Request for Reconsideration” (RfR) and an appeal date. 

Additionally, it will contain an access code to access your valuation details. Please preserve copy of the NOA as it becomes a source for dates and information.

Why DMA
Contact us if you own multi-residential property in Ontario.  Our approach is sound as we will prepare a strategy to ensure your position, perform all analyses, attend any and all consultation sessions with MPAC and represent your interests on all future appeal rights.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.