September 27, 2019
Did you know that when you close a building permit, the typical process in Ontario is to have your property reassessed in case you’ve added value to the property? If you have added enough value, your assessed value will likely be increased as well, which will effect how much property tax you pay to the municipality you live in. Makes sense, right?
But, did you know that if the process to initiate the reassessment does not happen right away, you could be on the hook for up to 3 years of taxes owed, depending on when the final permit was closed. This is considered an ‘Omitted Assessment’ and according to the Municipal Property Assement Corporation (MPAC) which can happen for a variety of reasons, but is usually a clerical error. When an omitted assessment is issued, the municipality may levy additional property taxes for the current year and, if applicable, for all or part of the two previous taxation years.
In real estate, this is important to know, because this could effect someone buying a property that has added:
- a swimming pool
- Newly constructed home
- Property class change
If you are looking to purchase a home in an established area that has had significant renovation, additions, or has been completely rebuilt, you need to know if the property has been reassessed and received a “Property Assessment Change Notice – formally known as Supplementary and Omitted Taxes”.
So, here is my tip if you are buying a property where you think the property taxes might be lower than they should be:
You really have 2 options:
- Make sure any and all permits are closed on the property, or talk to your lawyer about options (which will likely insist on a ‘hold back’)
- Make a condition of an agreement to review the “Property Assessment Change Notice”, and the most recent tax bill and any “omitted Assessment” tax bills. This will ensure you do not get stuck with an unforseen tax bill down the road.
- If the property has not been reassessed already, you will want to insist on a ‘hold back’ to ensure that your lawyer keeps some funds back on closing to pay any future tax bills. The amount will depend on the extent of the assessment increase.
If you have any questions about this, please do not hesitate to ask me. I’ve been through it personally and have had clients buy homes that were effected by this and we navigated them smoothly.
Posted by dtoombs at 6:36 AM
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