Toronto’s New Vacant Home Tax is an annual tax that will be levied on vacant Toronto residences starting in 2023. The Bylaw supporting the new vacant home tax came into effect on January 1, 2022, and the tax will become payable in 2023.

Background

The Vacant Home Tax aims to help address the current housing supply issue that Toronto is facing by discouraging homeowners from leaving their residential properties unoccupied. Vancouver imposed a similar tax in 2017, and the number of vacant residences is estimated to have been reduced by 25 percent.

Revenues collected from the Vacant Home Tax will be allocated toward affordable housing initiatives.

How Does the Tax Work?

All residential property owners in Toronto will be required to file an annual declaration regarding the occupation status of their home(s). As of January 1, 2022, all principal residences unoccupied for more than six months throughout the year will be subject to paying the tax in the following year.

If the declaration is selected for an audit, the City of Toronto will require the owner to provide information and evidence to substantiate their claim of occupancy of a residential property or any exemption.

How is the Tax Calculated?

The tax is calculated at 1 percent of the property’s current value.

How to Report Your Vacancy Status

The deadline to make a declaration is February 2 of the following year. Declarations can be made through the city of Toronto’s online declaration portal or by mail.

If a homeowner fails to make the annual declaration by the deadline and/or provide supporting documentation, their properties will be deemed vacant and subject to the tax. Additionally, homeowners that fail to make a declaration or make a false declaration may be subject to a fine ranging from $250 to $10,000. If any changes need to be made to a declaration that was already submitted, the following remedies will be available:

  1. A new declaration can be submitted if the February 2 declaration deadline has not yet passed; or
  2. A Notice of Complaint can be filed through the online portal if the February 2 deadline has passed.

How to Dispute a Vacant Home Tax Notice

A Notice of Complaint can be filed to dispute a Vacancy Tax Notice or Supplementary Assessment. The Notice of Complaint must be received within the following time frames:

  1. If disputing a Vacancy Tax Notice, the Notice of Complaint must be received on or before the 10th business day of April in the year following the date that payment was due.
  2. If disputing a Supplementary Notice, the Notice of Complaint must be received within 90 days of the date on the Supplemental Notice.

The decision made on a Notice of Complaint can also be appealed by submitting an appeal request within 90 days of receiving the decision.

How to Pay the Tax

The Vacant Home Tax is based on the property’s occupancy status for the previous year. Homeowners of residential properties declared as vacant for six months or more during the year will be issued a Vacant Home Tax Notice in March/April of the following year. Payment will be due on May 1 of the following year.

Payment can be made in any of the following ways:

  1. MyToronto Pay – a service provided by the City of Toronto to manage and pay parking tickets, property taxes, and utility bills.
  2. Through a Financial Institution
  3. Post-dated cheques payable to:

Treasurer, City of Toronto
Box 500
Toronto, ON M2N 5V1

Interest applies to any overdue Vacant Home Tax amount at a rate of 1.25 percent per month.

Exemptions to the Tax

Vacant properties may be exempt from the Vacant Home Tax if any of the following circumstances occur and the corresponding supporting documentation is provided:

  1. Death of a registered owner – the property will be exempt from the Vacant Home Tax if the property was vacant for six months or more in the previous year due to the death of an owner. A copy of the death certificate must be provided.
  2. Repairs or renovations – the property will be exempt from the Vacant Home Tax if the repairs and renovations have prevented occupation and normal use of the property, all necessary permits have been issued, and the City’s Chief Building Official is of the opinion that the repairs and renovations are being actively carried out without unnecessary delay. A description of the repairs or renovations preventing occupancy and a copy of the building permits issues related to the repairs and renovations must be provided.
  3. Principal resident is in care – the property will be exempt from the Vacant Home Tax if the principal resident is in a hospital, long-term or supportive care facility for up to six months during the taxation year. This exemption may be claimed for up to two consecutive taxation years. A signed letter from the health care facility on letterhead must be provided
  4. Transfer of legal ownership – the property will be exempt from the Vacant Home Tax if it was purchased in the previous year and the sale involved a 100 percent transfer of an interest in the property to an unrelated individual or corporation. A copy of the land transfer deed must be provided.
  5. Occupancy for full-time employment – the property will be exempt from the Vacant Home Tax if it is required for employment purposes for a total of at least six months in the taxation year by its owner, who has a principal residence outside of the Greater Toronto Area. Proof of residency outside of the Greater Toronto Area and a signed letter from the employer on company letterhead or the employment contract must be provided.
  6. Court order – the property will be exempt from the Vacant Home Tax if there is a court order in force that prohibits occupancy of the vacant property for at least six months of the taxation year. A copy of the court order must be provided.

Important Information to Be Aware of in Property Transactions

The Vacant Home Tax has implications for both purchasers and vendors in property transactions:

  1. Both parties have a responsibility to ensure that the declaration has been filed.
  2. The Vacant Home Tax will form a lien on the property, and any unpaid taxes will become the purchaser’s responsibility.
  3. If a closing occurs between January 1 and February 2, the vendor must complete the declaration prior to the closing, as the vendor will be the party that knows the property’s occupancy status for the prior year.
  4. If a closing occurs between February 3 to December 31, the purchaser must submit a declaration in the following year. The purchaser will qualify for the “transfer of legal ownership” exemption described above.
  5. Vendors should provide a copy of the completed and filed property status declaration to the purchaser.
  6. Vendors should provide a statutory declaration at closing confirming the filed property status declaration is true and correct.

Conclusion

The Vacant Home Tax is one of many efforts to curb Toronto’s housing market crisis. Currently, 2-4 percent of Toronto’s residential units are estimated to be vacant. In a few months, the first set of annual declarations will be filed, and the City of Toronto will be able to begin measuring the Vacant Home Tax’s effect on Toronto’s housing market. Owners of vacant homes will need to determine whether to occupy or rent out their property or pay the tax contributing to affordable housing initiatives.

 

About the Authors:

 

Richard Schuett is an attorney in Dickinson Wright’s business law group. He focuses his practice on corporate law, mergers and acquisitions, banking, corporate finance, and franchise matters. He can be reached at 416-646-6879 or rschuett@dickinsonwright.com. To read his full bio, please click here.

 

 

 

Jemark Earle is an Articling Student in the firm’s Toronto office. He can be reached at 416-777-4024 or learle@dickinsonwright.com. To read his full bio, please click here.