City of Toronto Vacant Home Tax
Did you know that an annual tax will be levied on vacant Toronto residences, payable beginning in 2023. This is known as the City of Toronto’s Vacant Home Tax.
A property will be considered vacant if it has been unoccupied for a total of six months during taxation year (previous calendar year) or is otherwise deemed to be vacant under the bylaw. Also, a property will be deemed a vacant unit if the owner fails to make the declaration or fails to provide information or evidence demanded by the City, and the failure is not reversed by way of a complaint or appeal. Simply put, failing to make the declaration required by the City of Toronto will result in a residential unit being deemed vacant and will result in a vacant home tax.
By-Law 97-2022 was enacted and passed on February 3, 2022. It is deemed to have come into force on January 1, 2022. All Toronto residential property owners must submit a declaration of their property’s 2022 status by February 2, 2023. The declaration portal is open and can be accessed here: https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/?accordion=exemptions
All residential property owners in Toronto will be required to declare the status of their property(s) annually, even if they live there. Declarations must be made by the homeowner. The declaration will determine whether the vacant home tax applies and is payable. For residential properties that are occupied, but not by the homeowner(s), owners will be required to submit information about tenants and/or permitted occupants when making the declaration.
Principal residences may be left unoccupied for periods of up to a total of six months throughout the taxation year without being subject to the tax. For residential properties declared as vacant for six months or more during the taxation year and without an eligible exemption, owners will be required to pay the vacant home tax.
An eligible exemption under the bylaw is:
- Death of the owner in the taxation year or in the previous taxation year.
- The vacant unit is undergoing repairs or renovations and the following conditions have been met (all must be met):
- Occupation and normal use of the vacant unit is prevented by the repairs or renovations for at least six months of the taxation year
- All requisite permits have been issued for the repairs or renovations; AND
- The City’s CBO is of the opinion that the repairs or renovations are being actively carried out without unnecessary delay.
- The principal resident of the vacant unit is residing in a hospital, long term or supportive care facility for a period of an aggregate of at least six months during the taxation year.
- This specific exemption may apply in respect of up to two consecutive taxation years.
- Legal ownership of the vacant unit has been transferred to an arm’s length transferee in the taxation year.
- The vacant unit is required for occupation for employment purposes for an aggregate of at least six months in the taxation year, by its owner who has a principal residence outside of the Greater Toronto Area; and
- A court order is in force which prohibits occupancy of the vacant unit for at least six months during the taxation year
Amount of Tax
Every owner of a vacant unit and every owner of a deemed vacant unit shall pay tax in the amount of 1% of the current value assessment of the residential unit. This will be the amount shown on the most recent returned assessment roll as of the payment date.
Change of Ownership and the Vacant Home Tax
The vacant home tax has implications for property transactions, both for purchasers and vendors.
- It is the responsibility of purchasers and vendors to make the appropriate arrangements to ensure that the declaration has been filed.
- The vacant home tax will form a lien on the property, and any unpaid taxes will become the purchaser’s responsibility.
- If a closing occurs between January 1st and the closing of the declaration period on February 2nd, the vendor must complete the declaration prior to the closing, as only the vendor will know the property’s occupancy status for the prior year.
- If a closing occurs after the declaration period (February 3rd to December 31st, 2023), the purchaser must submit a declaration in the following year. The purchaser qualifies for the “transfer of legal ownership” exemption.
- Vendors should provide a copy of the completed and filed property status declaration to the purchaser.
- Vendors should provide a statutory declaration at closing confirming the filed property status declaration is true and correct.
There are provisions that allow a homeowner to file a Notice of Complaint to have the City review the property’s status.
One of the reasons the City of Toronto has taken this initiative is to discourage owners from leaving their residential properties unoccupied. Homeowners who choose to keep their properties vacant, subject to the exemptions above, will be subject to this tax.