CASE SUMMARY: APPLICATION OF SECTION 33 OF THE ASSESSMENT ACT

Amanda Myers, Affiliate, Senior Litigation Advisor, Property Tax - Altus Group Chantelle MacMillan, Affiliate, Director, Litigation - Altus Group

On March 2, 2023, the Divisional Court released the decision of Drewlo Holdings Inc. v Municipal Property Assessment Corporation 2023 ONSC 1466 (“Drewlo”). The main issue before the Court in this matter relates to the scope of powers granted to the Municipal Property Assessment Corporation (“MPAC”) to make changes to the assessment of land during a tax year under Section 33 of the Assessment Act (“Act”).

Background

Drewlo, a property developer in the City of London, constructed three multi-residential towers in 2018 on what was a vacant multi-residential parcel, converting 2 of the 3 towers to condominium units in December of 2018. Upon roll return, MPAC returned the Subject Property on the 2019 Assessment Roll as vacant multi-residential land valued at $2,602,000. On May 8, 2019, MPAC issued an omitted assessment retroactive to January 1, 2019 (“May Omit”) assessing the land and multiresidential towers at a current value of $68,410,000 despite being aware since October 2018 that the apartments would be converted into rental condominiums. Subsequently, on October 8, 2019, MPAC issued the residential assessments pursuant to Section 33 retroactive to January 1, 2019 to capture the two towers converted to condominium units and a second omitted assessment for the third tower assessed at $21,377,500 as a multi-residential building (“October Omit”).

Assessment Appeals

At the Assessment Review Board (“Board”), the Appellant did not dispute the current value of the subject property, but rather argued that MPAC was not permitted to issue the October Omit as Section 33 only allows MPAC to amend the Assessment Roll if there has been an omission from the Assessment Roll. Since MPAC issued the May Omit, even though this omit failed to capture the conversion of a portion of the land to condominiums, there was no omission from the Assessment Roll because the land had been assessed and taxes had been levied.

Section 33 of the Act states:

33 (1) The following rules apply if land liable to assessment has been in whole or in part omitted from the tax roll for the current year or for all or part of either or both of the last two preceding years, and no taxes have been levied for the assessment omitted:

1. The assessment corporation shall make any assessment necessary to correct the omission.

2. If the land is located in a municipality, the clerk of the municipality shall alter the tax roll upon receiving notice of the change, and the municipality shall levy and collect the taxes that would have been payable if the assessment had not been omitted.

3. If the land is located in non-municipal territory, the Minister shall alter the tax roll upon receiving notice of the change, and shall collect the taxes that would have been payable if the assessment had not been omitted. 2006, c. 33, Sched. A, s. 23 (1).

By way of Section 33 of the Act, MPAC is permitted to make any assessment necessary to correct an omission if land liable to assessment has been omitted from the tax roll and no taxes have been levied for the omitted assessment. A two-part legal test that must be met in order to authorize assessments to be issued under Section 33 of the Act

Ultimately, the Board rejected Drewlo’s arguments and dismissed its appeals. The relevant question to the Board in the assessment appeals was whether the registration of the condominium plan created new “lands” to be added to the Assessment Roll. If no new lands were created, there would not have been an omission on the Assessment Roll after the May Omit was issued, and MPAC would not have the authority to issue the October Omit. However, the Board found that the condominium plans created new lands, and accepted the October Omit.

Leave for Appeal to Divisional Court

Leave to appeal was granted on the basis that there is reason to doubt the correctness of the Board’s decision with respect to the five alleged errors in the Board’s decision:

1. The Board’s interpretation of “land” in subsection 33(1) of the Act to mean the legal description of the land, may have been flawed. The parties made submissions, and the Board focused its interpretation on whether new “lands” were created by making reference to the Condominium Act, which neither party had made reference to. With no ability to make further submissions on the applicability and relevance of the Condominium Act, the procedural fairness of the hearing to the parties was also raised into question before the Divisional Court.

2. Although subsection 33(1) of the Act requires that no taxes be levied on the land, the Board failed to even consider that requirement under the Act in its interpretation of the issue before it.

3. In its disposition, the Board made an error of law by failing to limit the October Omit to correcting the omission from the assessment roll, instead permitting the current value to also be changed. The Divisional Court noted that Section 33 of the Act does not authorize a review of the valuation of the property.

4. The Divisional Court found that the Board failed to consider MPAC’s intentionality in issuing an incorrect May Omit for multi-residential towers despite its knowledge that the property was converted to condominiums leading up to the issuance of the May Omit. While the Divisional Court may agree that MPAC ought not be bound by precedents like that of East of Bay v MPAC, 2011 ONSC 242, the Court was concerned that the Board did not engage in a meaningful analysis of the importance of intentionality when such a question of law before the Board existed.

5. The Board incorrectly applied a timeline of events that contradicts the parties’ Agreed Statement of Facts. The Divisional Court felt that this required, at minimum, some explanation.

The Divisional Court will now assemble a panel of the Court to determine whether the Board was in error in its determination. The issue before the panel is not whether the assessment arrived at with respect to the subject property is correct (the parties agree on current value), but rather the issue before the Court is whether MPAC’s actions to achieve that correct assessment complied with the Act.