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Ontario Tax - Assessment - Residential Development Tax Incentive. Ajax (Town) v. Medallion Devels. (Bayly Square) A Ltd.
In (Ont Div Ct, 2025) the Ontario Divisional Court allowed a municipal appeal (brought with leave), this against "a decision of the Assessment Review Board (“ARB”), varying the classification applied by the respondent MPAC to the Medallion Respondents’ multi-unit rental residential properties".
Here the court considers (the case was remitted back down to the ARB) a statutory re-interpretation of a residential development tax incentive under the Assessment Act, turning on it's 'purpose' (that the incentive should only apply if it furthered the purpose of incentivizing residential development):[7] In its decision, the Board found that the provision “is clear and unambiguous”: the phrase “a building permit” means any building permit that is issued pursuant to which the rental residential development is constructed. Thus, the triggering event for determination of the applicability of the realty tax incentive is the date of the last building permit issued.
[8] The effect of this finding is that projects that were well underway at the time the scheme was enacted will be entitled to the benefit of the incentive, even though no further incentive would be required or effective, and (as in the situation in this case), even where the development has already received substantial tax incentives and there is a contractual obligation to complete the project.
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[11] The Board provided reasons why it considered its interpretation to be correct. The Board did not, however, apply the test to be followed for statutory interpretation (see Yonge Street Hotels Ltd. v. Municipal Property Assessment Corp., Region No. 9, 2005 CanLII 14438 (ON CA)). This was an error in principle and led the Board to fail to consider competing interpretations of the provision and to assess those competing interpretations in the context of the entire history of the subject properties and the purpose of the tax incentive scheme.
[12] For example, the Board noted that the purpose of the scheme is to provide an incentive to build multi-unit residential buildings. It found that its interpretation was not inconsistent with that purpose. This finding is true, but it fails to address that its interpretation provides an incentive that is overbroad compared to its purpose – that is, the incentive will be provided for projects that are already underway and have been incentivized by other incentive schemes (in this case, the incentives provided in the development Agreement).
[13] It is apparent that more than one interpretation may be available for the provision, and the interpretation chosen by the Board has the effect of conferring a substantial windfall benefit on projects that are (a) advanced to the point that no incentive is required for them to be completed; and (b) have been the beneficiaries of other incentives already granted by a municipality.
[14] There is no transitional language in the provision at issue, as was noted by the Board in its decision. This may leave only two tenable interpretations available for the provision: the building permit issued at the outset or the final of a series of building permits. It is unclear on the record and findings below that the former interpretation would fail to provide necessary incentives to continue with projects already underway, and if it was considered that it might, the extent to which this “under-inclusiveness” compared to the windfalls that would result by the “over-inclusiveness” of the interpretation adopted by the Board. Further, there is no consideration of the extent to which any “under-inclusiveness” of adopting the “first permit” test could be addressed by developers seeking project-specific incentives from municipalities to pursue their projects.
[15] I would not wade further into the relative merits of the two possible interpretations I have described, nor would I exclude possible other interpretations that may be urged by the parties (though I would note that the interpretations available would become, in effect. the “test” for application of the provision and would necessarily have to be expressed as such: the Appellant’s suggestion that there be some sort of assessment of the degree of progress of a project that is underway does not appear to have any support in the language of the Regulation). As argued by the respondent Medallion, the “test” cannot spring from the particular facts of this case, but rather, is an analysis that is to be provided to the facts of this case.
[16] These points arise in the context of assessment classifications that allocate tax burdens among ratepayers within the municipality. While I agree with the respondent that the Board may not re-write clear legislative provisions on the basis of the Board’s view of what is fair, the Board is entitled to note the effect of these realty tax incentives and to presume that Ontario did not intend a grossly unfair result to other ratepayers as a result of an over-inclusive incentive scheme. . Ajax (Town) v. Medallion Devels. (Bayly Square) A Ltd.
In (Ont Div Ct, 2025) the Ontario Divisional Court allowed a municipal appeal (brought with leave), this against "a decision of the Assessment Review Board (“ARB”), varying the classification applied by the respondent MPAC to the Medallion Respondents’ multi-unit rental residential properties".
The court noted tax incentives (under the Assessment Act) designed to increase rental housing conversion:[2] The case below concerned a legal question of first impression: the meaning of the phrase “a building permit” in the context of a realty tax incentive enacted by Ontario to encourage development of rental residential accommodation. The incentive is reduced municipal taxes (compared to other multi-unit residential properties) for a period of thirty-five years.
[3] Prior to this legislated incentive, municipalities could implement such a scheme locally. The Appellant municipality did not implement that scheme, but instead provided incentives on a project-by-project basis, tailored to the circumstances of the project.
[4] The Appellant municipality did enter into such an agreement with the Medallion Respondents for the development that includes the properties at issue. The agreement provides substantial tax incentives to Medallion and obliges Medallion to proceed with the development. The agreement pre-dates the tax incentive legislation at issue in this case.
[5] Medallion obtained initial building permits for the two buildings at issue – well prior to the new realty tax incentive scheme. As is common (but not universal) for large projects, “serial building permits” were issued for different stages of construction, all in respect to the same projects – and all under the same building permit numbers for each of Building A and Building B. The “final” building permits (in respect to the rental residential portion of the buildings) were issued after the effective commencement date of the new realty tax incentive scheme.
[6] Ontario’s new realty tax incentive applies to the “new multi-residential property class” defined in O. Reg. 282/98 (The “Regulation). Section 4 of the Regulations states:(1) The multi-residential property class consists of the following:
1. Land used for residential purposes that has seven or more self-contained units other than land included in the residential property class under paragraph 1 of subsection 3(1).
2. Vacant land principally zoned for multi-residential development.
(2) Land in the new multi-residential property class is not included in the multi-residential property class. Subsection 10(2) of the Regulation provides:The new multi-residential property class consists of land described in paragraph 1 of subsection 4(1) whose units have been built, or converted from a non-residential use, pursuant to a building permit issued,
(a) on or after April 20, 2017; or
(b) before April 20, 2017, if, at the time at which the permit was issued, a by-law was in force that opted to have the property class apply in the municipality, in accordance with subsection (1) of this section as it read immediately before it was revoked by O. Reg. 264/17.
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