by LAWPRO

The Vacant Home Tax (VHT) (Bylaw 97-2022) requires homeowners in Toronto to let the City know if their property is occupied or vacant by making a declaration every year. Did you know that if the purchase happens between January 1 and May each year, there is no notice of vacant home tax that may be due. The purchaser will be responsible for the vacant home tax even though there was no notice.

What to know:

  • Lawyers acting for sellers or purchasers based on a forced sale should be mindful of this information gap and verify if a declaration has been filed or if there is an eligible exemption available.
  • Purchaser’s lawyers should requisition the prior year’s Vacant Home Tax be paid to avoid their client becoming liable for the seller’s tax and to obtain a copy of any court order for possession to assist in any appeal of the tax.
  • Keep this in mind in other municipalities that have Vacant Home Tax: Ottawa has a Vacant Unit Tax (VUT). Hamilton has a Vacant Unit Tax (VUT). Windsor has a Vacant Home Tax (VHT). Sault Ste. Marie has a Vacant Home Tax (VHT).

How the Vacant Home Tax works:

Residential property is vacant if not occupied for six months or more during the taxation year. A property will be deemed vacant if the owner fails to make a declaration of occupancy status by the deadline, end of April of each year. There are eligible exemptions.

The City advises that the tax is due as of June 1 of each year with the invoice posted to the tax roll in May after the end of the filing period in April. The tax was 1% for the 2022 and 2023 taxation years and now 3% of the current value assessment since the 2024 taxation year.

Any sale closing after June 1st, and possibly earlier in May, would be notified of the tax by doing a tax search as it would be noted on the tax certificate. For any owner/resident selling their property, they would most likely have filed the declaration as to avoid any tax.

The issue arises for forced sales where the owner/resident may not be occupying the property and would have little interest in filing a declaration to avoid the tax. To make the annual declaration, you require the customer number plus the address or 21-digit assessment roll number from the property tax bill, property tax account statement or Vacant Home Tax notice. Declarations of occupancy status can be submitted either by the property owner or an authorized representative acting on their behalf.

Lenders who are enforcing on their security will typically not file a declaration as the authorized representative of the owner; nor will they provide any representation as to the tax status of the property as part of the sale process. This can create a situation where due to timing, there may be a blind spot as to the Vacant Home Tax status.

You can look up the current occupancy status of a property by using the Property Tax Lookup tool and scrolling down to the Vacant Home Tax accordion, but you will require the Assessment Roll No., Last Name or business name as it appears on the bill, postal code of the mailing address and/or Customer No.

Vacant Home Tax invoices for the prior year are posted by June 1st of the next year. If closing is scheduled in the New Year, prior to sometime in May when invoices are posted, the seller’s lawyer will pay any outstanding taxes as noted in their tax certificate, which will not include the previous year’s Vacant Home taxes. The purchaser’s lawyer doing a search and getting a tax certificate will not be apprised of the exigible Vacant Home Tax. The purchaser will, however, after June 1st get a tax bill from the City indicating the outstanding tax.

Although a new owner benefits from an exception for any tax owing in the year they bought, the exemption does not apply to prior years:

“The closing date of the purchased property was in the taxation year being declared. The sale involved a 100 per cent transfer of the property.”

There is also an exemption if there is a court order that prohibits occupancy of the vacant property for at least six months of the taxation year. In the case where the lender obtained an order for occupancy of the vacant property prior to June of the prior year, this could provide the new owner with the basis for an exemption. Purchasers typically will not have a copy of this order, which they will be required to provide to the City to have the exemption approved.

The City indicates that tax certificates come with a standard proviso, in a section titled: Important Notes, one of the notes states:

“This certificate may not include any Vacant Home Tax amount that is owning and which has not yet been added to the Collector’s Roll at the date of the certification. Additional information may be obtained by calling 311 within Toronto or 416-392-CITY (2489) outside City limits.”

Title insurance may cover the outstanding vacancy tax for the previous year as a matter that is possible to be a lien even if it is not disclosed or discoverable at the time.

In foreclosure proceedings, the lender becomes the owner and would be responsible for the tax, unless they sell shortly after acquiring title and before the invoices are posted.

Lenders exercising their power of sale will pay any outstanding taxes, but the prior year’s Vacant Home Taxes will not yet have been assessed and will be missed. The purchaser’s lawyer’s search will not disclose any outstanding Vacant Home Tax. During this period of time, the Vacant Home Tax is not disclosed by any City’s documentation and the purchaser will then inherit the outstanding taxes.

For convenience the definition of vacant property and the eligible exemptions.

Categories: Online Only, Real Estate