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Toronto’s vacant home tax: How you can help your clients

With the Feb. 2 deadline looming for every City of Toronto property owner to submit an online declaration of their property’s 2022 occupancy status, it’s important to advise your clients that they could face fines of up to $10,000 for failure to file. 

It’s not clear whether the penalty will be imposed by automatically adding it to the tax bill or the matter will be brought to bylaw infraction court like a parking ticket, where a justice of the peace will impose a fine, explains Bob Aaron, a Toronto real estate lawyer with Aaron & Aaron Barristers and Solicitors. 

The city’s new vacant home tax came into force on Jan. 1, 2023, and is based on the property’s occupancy status for the previous year. In addition to any fines for failure to file an occupancy status declaration, one per cent of the home’s assessed value must be paid if it was empty in 2022 – without an exemption.

The owner won’t be taxed if the property is occupied with a written tenancy agreement in place for a term of at least 30 days for residential purposes. The property must be occupied by at least one tenant for six months or more throughout the year. 

“It’s not clear what happens when there is not a written lease,” says Aaron. “This whole venture was badly thought out and drafted.”

To protect your clients, purchase and sale agreements should require the seller to provide proof that the declaration has been filed and that the seller will be liable for any penalties if the unit was vacant or the seller failed to file.


What properties are exempt?


No tax is payable if:

    • The property was vacant due to the death of an owner
    • The property was undergoing extensive repairs or renovations, and the necessary work prevents everyday use; all necessary permits have been issued, and the chief building official is of the opinion that the work is being carried out without unnecessary delay
    • The owner was in a hospital, a long-term or supportive care facility for at least six months but only for a maximum of two years (if the owner is in care or hospital for at least six months a year for three years, the tax applies) 
    • The property was purchased in the previous year, or it was required for occupation for employment purposes for at least six months, and the owner lives elsewhere
    • The property is a principal residence for snowbirds, students or others who study/travel abroad for extended periods

“This whole tax still seems to be a work in progress,” says Aaron, who continues to conduct extensive research into interpreting the new vacant home tax. 

Special rules also exist for units in co-operative and co-ownership buildings where the entire building receives one tax bill, and the individual units are not separately assessed.

“Only a single declaration form had to be submitted for the entire building – typically by the board or property manager,” Aaron told REM. “As long as at least one of the units is occupied, the property is not considered vacant, and no tax applies. This is ridiculous. Multiple units could be vacant, but the building is exempt.”

There are also issues with the tax that make it tough to interpret/unclear if certain properties or special circumstances are included, and the tax may have to be paid: 

    • Units that are zoned residential but are not the principal residence of the owner may legally be used as a home office, a music or artist’s/writer’s studio for the owner, or the owner’s property management office in a large apartment building
    • Airbnb units not part of the owner’s principal residence


How is a similar tax working in Vancouver?


Vancouver started out with an empty home tax of one per cent in 2017, which increased to five per cent in 2023. 

Brendon Ogmundson, chief economist for the British Columbia Real Estate Association (BCREA), told REM that the tax has had little impact on reducing vacant homes in the city because it wasn’t an issue to begin with. “It’s really just adding complexity without having a significant impact on supply,” he says.

A misinterpretation of census data led people to believe there were more vacant homes in Vancouver than there actually are, says Ogmundson, who suggests vacant homes represented about 1.1 per cent of residences in Vancouver, and the tax brought that figure down to about 0.8 per cent. He says the one positive thing to come of the tax is good data.

Taxes like this rank high on popular opinion polls because they make the government appear to be taking action, yet the fundamental issues of supply and zoning, which are much harder to address, would actually help provide more housing opportunities in the city, Ogmundson suggests.