Typically, changes in market conditions, such as a pandemic-induced economic downturn, would be reflected in the assessed value of properties, which could lead to a decrease in property taxes for some owners.
However, with the delay in reassessment, some property owners may continue to pay taxes based on pre-pandemic values even though their property value has decreased. This delay could lead to inequitable tax burdens for some property owners, depending on how the reassessment process is ultimately handled in 2024.
It is worth noting that property assessment and taxation policies can be complex and vary across jurisdictions, and the specific implications of this decision by the government of Ontario may depend on the details of the reassessment process and how it is ultimately implemented.
But this constant delay in reassessments by the Ontario province municipality has been a rising cause of concern for CRE owners. Are you one of them? Has this trend and shift in dates got you worried about your commercial properties? Do you feel like it's burning a hole in your pocket? You are not alone. Our property tax experts have analysed this situation and shed light on the situation. Read on to find out.
Property reassessment delayed in Ontario raises concern among CRE owners
The government of Ontario recently announced a delay in reassessing properties affected by the COVID-19 pandemic until 2024. This decision has become a cause of concern among many commercial property owners across Canada.
Property valuations are updated regularly to account for changes in market circumstances. The Municipal Property Assessment Corporation (MPAC) assesses the estimated value of properties based on a range of characteristics. This includes factors like position, condition, area, age, and quality, and it carries out this evaluation in Ontario.
Due to market instability and economic instability, the COVID-19 outbreak has substantially affected the Ontario commercial real estate market. Some places in this province saw a serious fall in property values. Yet, due to the delay in assessment until 2024, owners may still be required to pay taxes based on pre-pandemic rates even if their property worth has fallen.
Some stakeholders are concerned about the reassessment delay because they believe it could lead to an unjust tax burden for property owners. For instance, the owner of the property whose value has not decreased may sue the owner of the property whose value has decreased if two properties of equal worth are situated in different towns, but one has suffered a fall in value as a result of the pandemic while the other has.
What does the delay mean for commercial property owners?
According to the Ontario government, the purpose of delaying the reassessment is to give property owners security and predictability during a period of turbulence in the economy. However, some experts have opposed this choice, claiming that it would unfairly burden some property owners with taxes and might not adequately reflect the worth of homes in the current market.
It is important to remember that the delay in reassessment could have various effects on various properties. For instance, it's possible that commercial properties were more severely affected by the epidemic than residential ones; therefore, delaying the evaluation may disproportionately favor owners of commercial properties.
The multiple negative impacts of delayed tax reassessments in Canada
The delayed property tax assessments in Canada due to the pandemic can have a number of negative impacts on property owners, local governments, and the economy as a whole. Here are some potentially negative impacts of delayed property tax assessments:
Inequitable tax burdens
Property owners with declining property values as a result of the pandemic may face an unfair tax burden if property tax assessments are delayed. Property owners can end up paying more or less in property taxes than what is fair if their properties are not assessed at the current market value.
Reduced revenue for local governments
Local governments rely heavily on property taxes as a source of funding, and delayed assessments might diminish income when many communities are already struggling financially due to the pandemic. The ability of local authorities to deliver crucial services like development, community security, and welfare spending may be impacted by this.
Unfair advantage for some property owners
Missed assessments may also give property owners who pay taxes based on pre-pandemic valuations an unfair advantage. They might be capable of selling their properties for more money than they would if they were valued at their current market value, which could offer them an unfair edge in the market for real estate.
Reduced property values
Buyers could be reluctant to buy homes that are not evaluated at current market value, which could lead to decreased property values as a result of delayed assessments. This can cause the real estate market to slow down, which might have detrimental knock-on repercussions for the economy as a whole.
Uncertainty for property owners
Delayed assessments can leave property owners in the dark about how much they will have to pay in property taxes or how their properties will be valued. This could make it challenging for property owners to make future plans and might induce worry and anxiety.
Commercial property tax appeals in Canada with Assetsoft
Some stakeholders are concerned about the Ontario government's intention to postpone the appraisal of properties impacted by the COVID-19 pandemic until 2024. While the postponement would give property owners stability and security in the short term, it might also cause some property owners to pay unfair taxes and not fully reflect the worth of their homes in the current market.
In order to make sure that the reassessment process is fair and equitable for all property owners, it will be crucial to carefully analyze how it is executed as 2024 approaches.
Are you concerned about the delayed timelines of property tax reassessment in Ontario? Is it affecting your commercial real estate property business? Talk to our expert team to see how we can help you with better advice on staying prepared for the upcoming reassessment in 2024.