FE Magazine 2009 No. 5 Sep-Oct - FRPO

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Property Tax Reductions May Mean Rent Reductions! What Can You Do About It By Joe Hoffer and Paul Cappa, Cohen Highley LLP If your property assessments and/or your local tax rates decreased this year or if you converted your multi-residential property to condo status last year, your property tax reduction may trigger a rent reduction under the RTA effective December 31, 2009. Municipalities will issue Rent Reduction Notices (RRN’s) to Tenants this fall if their rent is reduced based on the Landlord’s property tax savings. Landlords should compare the tax figures on any RRN’s with their actual tax bills to ensure the local municipality has accounted for all of the taxes and municipal levies charged to the property. If the municipality charges separate levies for sewer, water, garbage or the Waste Levy, an application to the Landlord and Tenant Board (LTB) to reduce or eliminate the rent reduction may be justified. In Toronto, the Waste Levy is ignored in calculating property tax reductions and issuing RRN’s, but it is not ignored by the LTB in calculating whether the rent increase should varied or eliminated. The same applies to municipal sewer and water levies which, in London, are ignored in issuing rent reduction notices but which are taken into account by the LTB in varying the rent reductions. Fair Exchange • September / October 2009 It is absurd that landlords face rent reductions when their actual municipal charges are increasing, but if landlords do not file the variation applications, the rent reductions will take effect December 31, 2009 and will permanently impair income stream. Variation applications to the LTB are subject to strict timing, filing and notification requirements. Landlords who receive RRN’s based on property tax decreases should contact their legal or Rent Control advisor for advice on how fix the problem. F For information and advice concerning Notices of Rent Reduction and Variation applications to the LTB, contact Joe Hoffer or Paul Cappa: hoffer@cohenhighley.com or cappa@cohenhighley.com. 12
CFAA Report Sales Tax Harmonization By John Dickie, President, Canadian Federation of Apartment Associations (CFAA) In the Spring of this year, both Ontario and British Columbia announced their decisions to harmonize their sales taxes with the GST on July 1, 2010. Those decisions will result in higher landlord costs and higher rents for tenants in both those provinces. Some Canadians have already gone through the harmonization process. Shortly after the GST was introduced in 1990, Quebec adopted the GST structure for its sales tax (and now collects the sales tax for the federal government at the same time as it collects its own provincial sales tax). New Brunswick, Nova Scotia and Newfoundland harmonized their sales taxes with the GST in 1997. The experience in Atlantic Canada and Quebec was that harmonization quickly raised rents by about 1.5%. The effect on rents will be slower in Ontario because of rent control, but inevitably cost pressures will force rents up. The impact of harmonization is to extend the provincial sales tax (PST) to a variety of new input costs that previously were exempt. In the rental housing sector this includes such costs as gas heat, electricity, maintenance contracts, property management services, renovation contracts, and so on, which make up a large part of the operating costs of most rental housing providers. However, the PST was to some extent embedded in those costs because of being paid by the suppliers, and that PST also flowed through into what they charged to landlords. Now those suppliers will receive the benefit of the input tax credits on the provincial sales tax component. Effective July 1, 2010, landlords should be able to negotiate somewhat lower prices for contracts in industries which pay a lot of PST, such as construction contracts. Despite that, costs will certainly go up in most or all sectors where the new tax adds the provincial tax component to the GST. FRPO is working to obtain relief for Ontario landlords, whether permanent or temporary. The BC government has already announced that it will rebate the provincial tax on electricity and on energy for home heating, both for homeowners and for owners of rental properties. Obtaining that relief in Ontario would be a great help for landlords and tenants here. CFAA is working with the apartment associations in both Ontario and BC to make sure useful information is exchanged immediately, and to ramp up the grass roots input by landlords in the lobbying process. As an industry we badly need to improve the extent to which we are heard by government. In both Ontario and BC, the apartment associations do effective government relations work, but the lack of political involvement by most landlords constrains our influence. Time will tell what will result from the sales tax harmonization and the efforts to gain appropriate mitigation. Regardless of that outcome, more work needs to be done to gain more political involvement by ordinary landlords of all sizes, so that governments realize that imposing costs on landlords has a negative impact on them. F FRPO is one of 17 members of the Canadian Federation of Apartment Associations, the sole national organization representing the interests of Canada’s $40 billion private rental housing industry, which provides homes more than seven million Canadians. 13 The Voice of the Federation of Rental-housing Providers of Ontario
Page 1 and 2: SEPTEMBER / OCTOBER 2009 President
Page 4 and 5: Contents SEPTEMBER / OCTOBER 2009 F
Page 6 and 7: President’s Perspective Rental In
Page 8 and 9: The town is talking... Congratulati
Page 10 and 11: Fair Exchange • September / Octob
Page 14 and 15: Associate Members 2009 ADVERTISING
Page 16 and 17: Vince Brescia (FRPO); Ted Whitehead
Page 18 and 19: SKPM has evolved to become a full s
Page 20 and 21: these changes to ensure we can resp
Page 22 and 23: Read the Fine Print By Harry Fine T
Page 28 and 29: Liberal MPP’s Rent-Cap Proposal W
Page 30 and 31: The Speaker (Hon. Steve Peters): Th
Page 32 and 33: Aird & Berlis LLP Brookfield Place,
Page 34 and 35: • Vocalize your responses in adva
Page 36: CAPREIT Appoints New C.F.O. Company
Page 39 and 40: Good with numbers. Great with peopl
Page 41 and 42: What should landlords and property
Page 44: Multi-Unit Residential Mortgage Fin

FE Magazine 2009 No. 5 Sep-Oct - FRPO

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