I’ve talked many times about the need for property owners, both residential and commercial, to be protected from excessive assessments. Paying more than your fair share in property taxes is just wrong.
If you’re paying too much, you’re actually subsidizing your neighbours, who get off by paying less than they should. For businesses, this can hurt the bottom line and make them less competitive.
But challenging the assessment can be a costly and time-consuming process. For commercial property owners, this often incurs the expense of outside help, such as the counsel of a real estate lawyer and valuation experts.
The potential gain from an appeal likely won’t justify the expense if the annual tax bill in question is less than $20,000.
So where does that leave residential owners?
Poor return on the investment
On any given assessment cycle, about five to seven per cent of all properties will mount and win an appeal of their assessment. As there are some five million properties of all types in Ontario, this modest percentage still equates to 10s of thousands of properties.
A sizeable portion of those will of course be residential.
But contested assessments are rarely proven to be off by more than 20 per cent. If your residential tax bill is in the $3,000 to $4,000 range, that means a difference of up to only $600 to $800 a year, or up to $2,400 to $3,200 in total for the four years of the assessment cycle.
These potential savings won’t take you very far if you engage legal and professional services to file a request for reconsideration or to mount an appeal.
Homeowners, naturally, don’t need to engage professional help for either. They can do it themselves, or have a friend or family member act on their behalf, so long as they are not being paid in any way (here’s an example of the authorization form).
Ontario’s Municipal Property Assessment Corp. (MPAC), does offer a growing library of online resources to guide residential property owners through the process, but that still doesn’t mean they will fully understand it.
Overwhelming for the average homeowner
I believe our system of Market Value Assessment is a generally good and progressive way of distributing the costs of municipal government. Those with higher incomes who tend to purchase more expensive homes shoulder a greater portion of the local tax burden.
This creates general equity of tax bills. But it doesn’t work perfectly all the time. If there is a problem with a residential assessment, homeowners with average assessments remain at a disadvantage when it comes to challenging their assessment.
A business owner is accustomed to engaging with legal resources and pursuing legal actions in the course of their business. They are comfortable with the fact legal matters are a natural part of doing business.
Most homeowners who work salaried jobs, on the other hand, have had little if any experience with legal process, other than perhaps having to deal with the occasional parking ticket or undertaking the purchase and sale of a home.
The prospect of engaging in some kind of legal process can be overwhelming. Entering into what they perceive as an adversarial situation is uncomfortable.
It pretty much means they are calling up their local assessor to tell them they’ve done their job wrong. And suspecting that your assessment is unfair often leaves people, understandably so, in an emotional state ill-suited for working with the system.
This is a matter that requires a cool head, attention to detail and a lot of patience.
We can do better
In short, the appeals process, as fair as it may try to be, still leaves the average homeowner at a disadvantage if an error has occurred.
The economics of incurring outside legal help just don’t add up. We need an alternative that is friendlier, easier and inexpensive.
I’m not sure what form this can take. Perhaps we need to create an ombudsman focused exclusively on disputed residential assessments.
Whatever the solution, I am sure we can do better. Not only will this help homeowners, it will ease the burden on the system.
To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.